Posts Tagged ‘Kyle Pomerleau’

Tax Roundup, 11/12/15: W-2 trumps uncertain memory. And: more debate reaction.

Thursday, November 12th, 2015 by Joe Kristan

Day 4: Ottumwa! The big first week of The  ISU Center for Agricultural Law and Taxation Farm and Urban Tax Schools concludes for the Day 1 teaching team of me, Kristy Maitre and Roger McEowen at Indian Hills Community College in Ottumwa, Iowa today. The Day 2 team of Paul Neiffer, Dave Repp and Patty Fulton will finish up in Red Oak this morning.

It’s been some driving this week:


If you missed us, there are still four two-day schools left. We hit Mason City next Monday; Maquoketa November 23; Denison December 7; and Ames December 14. The Ames session is available as a webinar. Register today!


Sure enough. Few of us (generally only tax preparers) double-check the income reported on our W-2s. We take the employer’s word for it. So does the IRS. That’s the lesson a Californian learned this week in Tax Court.

The taxpayer faced some extra hurdles in filing his 2010 tax returns, according to the Tax Court:

Petitioner was arrested the second week of January of 2011 and was incarcerated until June 2012. Petitioner’s motorhome and van were seized, and he lost all of his records after his arrest and incarceration.

Petitioner did not file a timely return for 2010. On April 1, 2013, the Internal Revenue Service (IRS) prepared a substitute for return for 2010 under section 6020(b). The IRS issued a notice of deficiency for 2010 dated July 8, 2013.

Considering the circumstances, you can understand the non-filing, even while realizing he still needed to. But he was nagged by doubts (my emphasis).

As indicated, petitioner conceded all of the income determined in the notice of deficiency with the exception of wage income of $3,767 from Audio Visual Projection Services, Inc., and $404 from Swank Audio Visuals, LLC. These employers issued petitioner 2010 Forms W-2 for the respective amounts. Petitioner explained that because all of his records were lost and his employers often paid him late or not at all, he does not know whether he was paid for all of the work that he performed in 2010.

It’s an interesting defense. He didn’t say he wasn’t paid; he just wasn’t sure. But the court was sure enough (citations omitted, my emphasis):

In unreported income cases, the Commissioner must base the deficiency on some substantive evidence that the taxpayer received the unreported income.  If the Commissioner introduces some evidence that the taxpayer received unreported income, the burden shifts to the taxpayer. The Forms W-2 from Audio Visual Projection Services, Inc., and from Swank Audio Visuals, LLC, are sufficient evidence to shift the burden of proof to petitioner.

We also note that section 6201(d) provides that in any court proceeding, where a taxpayer asserts a reasonable dispute with respect to any item of income reported on an information return and the taxpayer has fully cooperated with the Secretary, the Secretary has the burden of producing reasonable and probative information concerning the deficiency in addition to the information on the return. The key term in the foregoing sentence is “a reasonable dispute.” This Court has concluded that a taxpayer does not raise a reasonable dispute for purposes of section 6201(d) merely by testifying that he is uncertain, cannot remember, or does not know.

Adding insult to uncertain memory, the Tax Court upheld penalties for late filing; being in jail is apparently no excuse.

Cite: McDougall, T.C. Summ. Op. 2015-65.




TaxGrrrl bravely live-blogged the GOP debate this week. A handy place to check out what they had to say on taxes.

Kyle Pomerleau, Senator Ted Cruz’s Comment About His Border-Adjusted Tax, Explained (Tax Policy Blog).

Jenice Johnson, Candidates Tax Cuts Unequivocally Skew Toward the Wealthy (Tax Justice Blog). It’s just math. The wealthy pay pretty much all of the taxes, so they will “reap” any tax cuts.

Scott Greenberg, Carson Calls for Eliminating the Mortgage Interest and Charitable Deductions (Tax Policy Blog).


Paul Neiffer, When Will We Know Section 179 Amount?. My intrepid tax school colleague ponders the likelihood and timing of the “extender” bill for this year.

Tri-state sales tax webinar! The Iowa Department of Revenue will have a free webinar covering “Sales and Use Tax Basics” for Iowa, South Dakota and Nebraska. It’s easy to get nexus for sales tax. There are plenty of Iowa businesses that need to take care of sales taxes elsewhere.

Ying Sa, My IRS is little ( “Many immigrant-owned small businesses begin with a focus on just selling. The rest, such as an income statement, balance sheet and tax compliance, is sometimes unknown to them.”

Insureblog, Worse Insurance, Higher Cost. “The fact is, your insurance is going to get worse and you are going to pay more for it.”

Robert D. Flach, QUESTIONS ANSWERED. Robert answers a reader question on deducting state property taxes.

Tony Nitti, The Top Ten Tax Cases (And Rulings) Of 2015, #8: Tax-Free Parsonage Allowance Gets A Second Life.

Russ Fox, The Real Winners of the World Series of Poker (2015 Edition). Hint: the winner’s first initial is “I.”

Janet Novack, Here’s How Congress Just Cut Social Security For Baby Boomer Couples. The end of “file and suspend.”


TaxProf, The IRS Scandal, Day 917,

Stuart Gibson, The European Predictability Paradox (Tax Analysts Blog). “Paradox will rule the European tax world, in which certainty will become uncertain and the predictability accorded by advance rulings will become entirely unpredictable.”

Renu Zaretsky, To make money you have to spend money…” Today’s TaxVox headline roundup covers the Dell-EMC merger, international tax reform hopes, and lots more.


News from the Profession. CPAs Admit That They’re Not Good Business People (Caleb Newquist, Going Concern).



Tax Roundup, 11/9/15: Waterloo! And Estonia!

Monday, November 9th, 2015 by Joe Kristan

Day 1: Waterloo! The ISU Center for Agricultural Law and Taxation Farm and Urban Tax Schools are underway! I am on this morning’s panel in beautiful Waterloo, Iowa, with Roger McEowen and Kristy Maitre. Spaces are available for all of the remaining Iowa sessions, so register today! If you can’t make one of the sessions in person, you can attend the December 14 Ames session via webinar.

The November 9 session of the Farm and Urban Tax School in Waterloo is underway!

The November 9 session of the Farm and Urban Tax School in Waterloo is underway!

The early-rising schedule for the drive up here today requires an abbreviated roundup today, so let’s roll.


Kyle Pomerleau Estonia’s Growth-Oriented Tax Code. (Tax Policy Blog). It excerpts a speech from the Estonian Ambassador to the U.S.:

The main components of the Estonian tax system have been in place since the beginning of the 1990s. After Estonia regained independence in 1991, the country needed a tax system that was compatible both with the limited experience of the taxpayer who came from the Soviet communist controlled society and effective tax administration. It was essential that the tax system should support economic growth, not impede it. Therefore, a tax system was developed with an emphasis on indirect taxes. To keep the system simple, transparent and easy to use, only a few exceptions were allowed, as at the same time, tax rates were kept rather low.

A cornerstone of Estonia’s fiscal policy was corporate and personal income tax reform, which introduced the proportional, or flat tax rate of 26% in 1992, which has been reduced to 20%. Since 1999, reinvested corporate profits are no longer subject to income tax. Today, Estonian income tax system, with its flat rate of 20%, is considered one of the simplest tax regimes in the world

We could do a lot worse than the Estonian system. We certainly do now.


Tony Nitti, Renting Your Home On Airbnb? Be Aware Of The Tax Consequences:

Section 280A of the Internal Revenue Code, which governs the treatment of homes that are used for both personal and rental purposes, is a complicated tangle of definitions, designations, and resulting consequences. But if you’re going to start renting out a property on Airbnb or Craigslist, you’re going to need to know the rules, so let’s take a deep dive into Section 280A and see if we can’t help all of you newly-minted slumlords sort through your tax considerations.

And remember the local lodging tax that may apply.


Still plenty of coffee and juice in Waterloo...

Still plenty of coffee and juice in Waterloo…


Headline of the Day: Colorado county’s pot tax to pay for higher education (Kay Bell). 

Jason Dinesen, What Is Iowa Alternate Tax?

Peter Reilly, Republicans Want IRS To Target Hillary Clinton:

Given the outrage that Republicans have expressed about the “targeting” of the Tea Party by the IRS, you would think that they would be slow to advocate IRS political targeting.  Apparently  it is more a matter of who’s ox is being gored.

That’s why the party in power may regret the way it has politicized the IRS. It isn’t likely to remain in power forever.


Rachel Rubenstein, IRS Announces Procedures for Identity Theft Victims to Request Copies of Fraudulently Filed Tax Returns (Procedurally Taxing).

TaxGrrrl, Austrian Woman Destroys Million Dollar Fortune Rather Than Pay Out Heirs

Robert D. Flach offers A YEAR-END TAX PLANNING TIP on capital gains.


...but the breakfast treats are going fast.

…but the breakfast treats are going fast.


Russ Fox, Chaka Fattah, Jr. Guilty of Tax and Fraud Charges. “Chaka Fattah Jr., son of Democratic Congressman Chaka Fattah Sr. (D-PA), was found guilty on Friday of 22 of 23 tax and fraud charges.”

Jack Townsend, Financial Secrecy in the U.S. – A NonTax Example Illustrating the Law Enforcement Problem:

One of the issues is that opacity of U.S. entity structures.  The beneficial owners of corporations and other entities may simply not be known.  And states permitting such entities to be organized usually do not request any representations of ownership.  So, shady actors can easily fly under the law enforcement — including tax enforcement — radar screen.  Hence, the U.S. may facilitate evasion of other countries’ taxes by offering foreign investors secrecy as to their investments in the U.S.

In the FATCA era, it will be more difficult for us to tell foreign tax collectors that U.S. tax structures are none of their business.


TaxProf, The IRS Scandal, Day 912Day 913Day 914.

Renu Zaretsky, Repeal, Reform, and Maybe Retaliation. Today’s TaxVox headline roundup topics include efforts to repeal the “Cadillac Tax,” the background of the new Ways and Means Chairman, and allegations of retaliatory audits in New Mexico.

Sebastian Johnson, State Rundown 11/6: Election Day Wrap Up (TAx Justice Blog).
Career Corner. More Accounting Firms Should Let Employees Build Their Own Niche Practices (Caleb Newquist, Going Concern).



Tax Roundup, 10/9/15: If you don’t e-file your business return, you may stand out. And: FATCA follies, Friday fun.

Friday, October 9th, 2015 by Joe Kristan

e-file logoI shouldn’t e-file, they might notice me. There remain some people who worry that by filing electronically, they make it more likely that the IRS will cause them trouble. Their numbers are shrinking, according to this IRS press release:

The Internal Revenue Service announced today the number of tax returns e-filed by businesses rose nearly 9 percent this year, continuing the growth in the number of corporate and partnership returns filed electronically. This year, an additional 625,000 corporations and partnerships chose to e-file their tax returns.

As of Sept. 20, almost 8 million corporations and partnerships e-filed their income tax returns. The IRS estimates that e-file accounts for 77 percent of all corporate and partnership returns filed during 2015. Many corporations and partnerships operating on a calendar year receive filing extensions. The due date for filing a return after filing for an extension is usually Sept. 15.

I like e-filing for a number of reasons. I like that we can be sure the return is actually filed and received on time by the IRS, especially when there is a time-sensitive election, or a foreign information return that can trigger a $10,000 penalty if filed late. As you can now e-file most extra forms, like elections and signed charitable contribution Form 8283 appraisal statements, it’s become more convenient. And I think that any time an IRS employee has to touch your return, you increase the risk of an IRS mistake, or of IRS curiosity.



Russ Fox, IRS to Tax Professionals: Rules for Thee but Not for Us. Russ discusses the IRS rules for preparers on safeguarding taxpayer data, including this:

6. Do not mail unencrypted sensitive personal information.

Russ comments:

There’s nothing wrong with these recommendations; in fact, they’re excellent. But note that the IRS says that authorized e-file providers that participate in the role as an Online Provider must follow these rules.

I highlighted the last rule (#6, above) regarding mailing unencrypted sensitive personal information. Why? Because the IRS is one of the biggest offenders in this area.

Yet serious people think that this agency, which can’t even run its own shop, should regulate preparers more.


Robert D. Flach offers fresh-picked hand-crafted Friday Buzz. His links today range from the effects of high tax regimes to the early distribution penalty for IRAs

TaxGrrrl, The Last 10 Things I Bought: How A Busy Working Mom Spends Her Money

Kay Bell, McCarthy ends House Speakership quest; Ryan still says ‘no’




Colleen Graffy, The Law That Makes U.S. Expats Toxic (Wall Street Journal):

Aimed at preventing money laundering, the financing of terrorism and tax evasion, Fatca requires foreign financial institutions such as banks to report the identities of their American customers and any assets those Americans hold. Institutions that don’t comply are subject to a 30% withholding tax on any of their own transactions in the U.S.

This provision was enacted without regard for its effects on the 8.7 million U.S. citizens living abroad, who have essentially been declared guilty of financial crimes unless they can prove otherwise. Many institutions no longer consider their American clients worth the burden and potential penalties of the law, and are abandoning them in droves.

This isn’t news for regular readers here, but it is for almost everyone else. Yet the politicians who smugly imposed this outrageous regime blithely move on to other targets, like the “carried interests.” And so many people trust the politicians to “solve” the “problem” without doing massive damage — despite all history and evidence to the contrary.


Glenn Reynolds, If You Tax It Too Much, They Will Go (USA Today). “IRS data show that taxpayers are migrating from high-tax states like New York, Illinois, and California to low-tax states like Texas and Florida. And it’s not just sports stars or star scientists, doing that, but fairly ordinary people — though, of course, people who earn enough money to pay taxes.”


TaxProf, The IRS Scandal, Day 883. In which he features Peter Reilly’s discussion of whether his scandal coverage has “jumped the shark.” So meta. I get a mention.




Kyle Pomerleau, The Key Component of the Estonia’s Competitive Tax System (Tax Policy Blog).

There are many impressive features in the Estonian tax code. It has a flat individual income tax rate of 20 percent, a broad-based 20 percent value-added tax, and has few distortive taxes such as the estate tax or financial transaction taxes.

All of those features contribute the Estonia’s high score. However, the most important and competitive feature of the Estonian tax code is its corporate income tax system. And not only is its corporate tax system competitive with a low, 20 percent rate, it is unique among OECD countries in how it works.

The Estonian corporate income tax is what is called a cash-flow tax. Rather than requiring corporations to calculate their taxable income using complex rules and depreciation schedules every single year, the Estonian corporate income tax of 20 percent is only levied on a business when it pays its profits out to its shareholders.

I prefer that corporations be taxed as income is earned and that they be allowed to deduct payments to shareholders, but the Estonian way has an advantage. The business owners are never taxed until they actually get something out of the business. There is no possibility of income tax exceeding corporation income over its life that way, which can easily happen in our system.


Steven Rosenthal, Making Wall Street Pay—Proposals from the Campaign Trail (TaxVox). There’s no shortage of stupid out there on the trail.


Career Corner. Reminder: Please Take Vacation So You Don’t Die (Leona May, Going Concern).




Tax Roundup, 8/13/15: IRS makes it hard to extend the W-2 deadline; Iowa makes it easy to extend a farm lease.

Thursday, August 13th, 2015 by Joe Kristan

20150813-1IRS ends automatic extensions for W-2s. Tax Analysts reports ($link) that IRS will no longer allow automatic extensions for W-2s. Non-automatic extensions will be allowed only in dire circumstances, according to the report:

Under the new rules, the IRS will grant the nonautomatic extension only when the filer demonstrates “extraordinary circumstances or catastrophe,” such as loss of record from fire or natural disaster.

It is an attempt to get wage information in sooner to make it easier to match refund claims to withholding, to help prevent identity theft. It’s a nice thought, but it is nowhere near enough. E-filed W-2s can be filed as late as the end of March – far too late to do much matching before refunds are issued.

Fighting identity theft will require more. It will probably require delays in refunds. It may also require a change in the culture that thinks big tax refunds are a good thing.

It will also require the IRS to raise its game in fraud prevention in its return processing. Russ Fox, Why Rob Banks, Redux:

From Los Angeles comes the news that the California Attorney General’s Office, along with the Long Beach Police and the US Postal Inspection Service did a “takedown” of the “Insane Crip” street gang; 22 members are in custody on charges that include 283 counts of conspiracy, 299 counts of identity theft, and 226 counts of grand theft.”

I doubt there is a lot of sophisticated computer savvy in the Insane Crip ranks. That the IRS is losing billions to street criminals says a lot about how poor the IRS anti-theft systems are.




Kristine Tidgren, Remember the September 1 Lease Termination Notice Deadline (Ag Docket):

Perhaps the most misunderstood portion of Iowa farm lease law is that governing the proper termination of a lease. Iowa law is unique in that under Iowa Code §562.6, a farm lease renews automatically—under the same terms and conditions as the original lease—absent specific action by one or both parties to the lease. The automatic renewal provision applies to both oral and written leases. 

Kristine explains what to do to end a bad lease.


Robert D. Flach, ONE REASON YOU SHOULD KEEP COPIES OF YOUR TAX RETURNS FOREVER. “I recently came across an excellent example of the benefit of keeping copies forever.”

Jason Dinesen, Choosing a Business Entity: Partnership. “A partnership can exist — for both tax and legal purposes — even if there’s no written agreement in place.”

Kay Bell, Don’t miss the tax break for college textbooks. “The American Opportunity Tax Credit, or AOTC, covers expenses for course-related books, supplies and equipment that are not necessarily paid to the educational institution.”


TaxGrrrl, Gun & Ammo Tax Aims At Reducing Violence In Seattle:

It wouldn’t be the only such tax in the country. A similar tax in Cook County, Illinois, was adopted after much controversy in 2012. The hope was that it would slow gun violence. However, according to reports in the Chicago Tribune, gun violence continues to escalate in the city of Chicago with the numbers of persons shot in 2015 so far on pace to top those shot in 2014.

This is the same community that is pricing the poor out of the job market with minimum wage increases.  In both cases, moral preening is substituted for sound policy.


Peter Reilly, Church Attendance Held Against Taxpayer In Maryland Domicile Case. Though I suspect attendance at the Secular Humanist Club down the street would have gotten the same result.




Kyle Pomerleau, Senator Carper Introduces Gas Tax Increase Paired With EITC and Child Tax Credit Expansion (Tax Policy Blog). “Paired with an EITC expansion, however, a gas tax increase becomes distributionally progressive: low-income taxpayers receive a net tax cut while middle and upper-income taxpayers receive a slight tax increase.”

TaxProf, The IRS Scandal, Day 826

Career Corner. Can an Accounting Firm Be a ‘Guilt-Free Zone’? (Caleb Newquist, Going Concern)



Tax Roundup, 8/4/15: Cash-basis farmers score Tax Court win. Plus Buzz, and more!

Tuesday, August 4th, 2015 by Joe Kristan

binStrawberries. An old joke holds that the tax law has a provision that makes it illegal for farmers to pay taxes. Jokes usually express an underlying truth. The ability of most farm enterprises to deduct expenses on a cash basis is a big part of the joke. A fiscally-alert cash-basis farmer can ease the tax pain of a profitable year by buying up to a year’s worth of feed, seed and supplies on December 31, deducting the whole purchase.

The Tax Court last week upheld a broad use of cash-basis deductions by farmers in a case involving a California strawberry grower, Agro-Jal. This cash-basis deduction challenged case differs from what you might see in a typical Iowa crop or livestock operation. The taxpayer packs the strawberries it grows, and it purchased and deducted the packing materials on a cash basis. The IRS said that such supplies are not the sort of feed, seed and materials allowed to farmers as a cash basis deduction.

Judge Holmes looked at the rules and said the IRS got it wrong. The decision largely hinged on a Section that wasn’t directly in play here, Section 464. This section was enacted to fight an early tax shelter based on allowing cash basis farm deductions to off-the-farm investors by preventing “farm syndicates” from using the cash method. Judge Holmes considered the IRS arguments, and then noted (my emphasis, footnotes omitted):

But section 464 does bolster Agro-Jal’s argument indirectly, because the history of section 464 shows that before its enactment anyone in the farming business could immediately deduct prepaid expenses. Seen against this backdrop, section 464 looks like it was aimed at both especially abusive taxpayers — “farming syndicates” — and to certain especially abused expenses — “feed, seed, fertilizer, or other similar farm supplies.”

I understand this to mean that absent some other provision, farmers can, or could, deduct all prepaid expenses. Judge Holmes went on to consider the tax regulation on deductions of materials and supplies, and concluded that the IRS reading was not supported.

There is another wrinkle. The IRS has re-issued the “materials and supplies” regulation as part of its “repair regs” project, and it has changed the language relied on by the taxpayer. Tax Analysts discusses that change ($link):

Sharon Kay of Grant Thornton LLP said that the reference to the old version of the regs may not help other cash method farm taxpayers understand how to apply the new final tangible property regulations on materials and supplies. “That’s the big question,” she said. “What does this case mean, not just looking back, but actually looking forward under the new tangible property regulations?”

Kay noted that throughout the revisions to the tangible property regs, the IRS had made statements, primarily in the various preambles, that it did not intend for the revisions to substantially change the “determination of the treatment of materials and supplies as either non-incidental or incidental.” She said that the holding in Agro-Jal reflects farm taxpayers’ understanding of the law and general practices.

This may mean the IRS could continue to challenge deductions under the new regulations, hoping for a different result. But for Iowa livestock and crop farmers, whose big prepaid deductions are mostly for advance purchases of feed, seed and fertilizer, cash accounting does not seem to be under immediate threat. And it probably wouldn’t have been even if the IRS had won this case.

Paul Neiffer has more: Cash Basis Farmers Allowed to Deduct All Costs!

Cite: Agro-Jal Farming Enterprises, Inc., 145 T.C. No. 5.




It’s summer. The bees are buzzing, and so is Robert D. Flach with a fresh Buzz roundup, including coverage of the new due-date rules.

Robert Wood, Charging $476K For Strippers On Company Card? No Tax Deduction, Jail Instead. That’s a lot of $1 bills.

Peter Reilly, Review Of Julian Block’s Home Seller’s Tax Guide. “The book packs a lot of important information into less than 100 pages.  I think that if I had a real estate office, I would be negotiating with Julian to buy copies in bulk to hand to potential clients as a marketing tool.”

Jim Maule, Another Problem with Targeted Tax Credits. “Once tax credits are handed out, everyone wants in on the gravy train.”

Kay Bell, Cool tax moves to make during August’s hot Dog Days

Jack Townsend, New Legislation Affecting FBAR and Tax Matters (8/1/15).

Mike Feehan, Urban Legends, Insurance File No. XXIV (Insureblog). “My opinion?  Most claims submitted are valid claims.  And systematic denial of valid claims is an urban legend.”


Cara Griffith, New York Attempts to Tax Income From Nonresident Lawyer Based on Bar License (Tax Analysts Blog):

“Thankfully, an administrative law judge for the DTA set the division straight. The ALJ concluded that the division’s argument is meritless, inconsistent with the state tax regulations, and inconsistent with New York judiciary laws. “The Division cannot,” the ALJ said, “assert tax merely based on a New York license.”

This is a case where my “sauce for the gander” proposal would allow taxpayers to collect penalties from the state for making a frivolous argument.

Richard Auxier, Recovery cannot save state budgets from politics (TaxVox). “Since then the economy has improved, state tax revenue are growing, and legislatures have more room to maneuver during budget season. Yet havoc still reigns in many statehouses. In fact, it might be getting worse.”




TaxProf, The IRS Scandal, Day 817

Matt Gardner, Innovation Boxes and Patent Boxes: Congress Is Focusing on Corporate Tax Giveaways, Not Corporate Tax Reform. (Tax Justice Blog). The “patent box” would give preferential rates for intellectual property income, which would create a new industry of consultants devoted to making all income I.P. income. Far better to broaden the base and lower rates for everyone.

Kyle Pomerleau, Ways and Means Committee Introduces “Innovation Box” Discussion Draft (Tax Policy Blog). “Simply put, a patent box provides a lower tax rate on income related to intellectual property.”



Most economists, on the other hand, believe that targeted tax incentives may work, but only in the sense that companies get extra cash and say the right things at press conferences. However, the tax breaks often don’t work in the sense of actually boosting state and local economies in any appreciable way. One large high-tech warehouse on the edge of town with 40 workers won’t transform anything. Neither will a dozen.

Billy Hamilton, Tax Analysts ($link)


News from the Profession. Accountant Posts Big Game Hunting Photos, Internet Flips Out (Caleb Newquist, Going Concern). I hope my big game trophy shots never make the internet. Oh, wait…



Tax Roundup, 8/3/15: Due date scramble edition, with extendable FBARs!

Monday, August 3rd, 2015 by Joe Kristan

20150803-1Highway bill scrambles business return due dates. A “short term highway funding bill” (HR 22) has switched some tax return filing due dates from what they have been pretty much forever. The bill, signed last week by the President, responds to complaints that K-1s are arriving too late by accelerating the partnership return due date and delaying C corporation due dates — with one bizarre exception.

The changes, which take effect for years beginning after December 31, 2015:

1065 (Partnership) returns: Currently due April 15, or 3 1/2 months after year-end, with a five-month extension. The new due date is March 15 (or 2 1/2 months after year-end), with a six-month extension.

1120 (C corporation) returns: Currently due March 15, or 2 1/2 months after year-end, with a six-month extension available. The new law makes the due date April 15 (or 3 1/2 months after year-end), with a six-month extension. Except, weirdly, for C corporations with a June 30 year-end, which retain the old deadlines through 2025.

FBAR (form 114) reports of foreign financial accounts. These have been due on June 30, with no extension available. They will be due on April 15, but with a six-month extension available.

1041 (estate and trust income tax) returns retain their April 15 due date, but their extension period is shortened from six months to 5 1/2 months.

It’s not entirely clear yet how this will work. I hope the FBARs will be considered automatically extended if the 1040 or other return is extended, to help avoid paperwork foot-faults.

The bill is an empty gesture to 1040 filers who get frustrated waiting on K-1s. They won’t get issued any faster. K-1s aren’t delayed because people are sitting around waiting for the due date. They are delayed because the tax law is hard, businesses can be complex, and it takes time to get the work done. On top of that, everybody is on a calendar year, thanks to Congress, so the professionals are trying to get all the returns completed at the same time.

All this means is that more partnership returns will be extended. It won’t get the K-1s out any sooner. The only way to change that is to simplify the tax law and to once again enable pass-throughs to have tax years ending on dates other than December 31.

Additional coverage:

Robert Wood: Many IRS Tax Return Due Dates Just Changed, FBARs Too

Russ Fox, Deadline Changes for 2016 Tax Returns and 2016 FBAR. “It is unclear whether a separate extension for the FBAR will need to be filed. The reference to Treasury Regulation 1.6081-5 is for the automatic two-month extension of time to file for those residing outside the United States, so it appears those who do so reside will have a June 15th deadline for filing the FBAR (with a four-month extension available until October 15th).”

Kay Bell, Highway bill drives home some new tax laws

Paul Neiffer, Tax Return Due Date Changes and Other Items. “For estates required to file an estate tax return, they will now be required to report to the IRS basis information for all assets included in the estate.”

Kyle Pomerleau, Senate Approves Three-Month Highway Trust Fund Extension (Tax Policy Blog).




Congratulations to TaxGrrrl Kelly Phillips Erb. She has ditched tax practice to write on taxes full-time for Well done!

William Perez, Every State’s Sales Tax Holiday for 2015

Jason Dinesen, New Nebraska Guidance on Same-Sex Marriage and Taxes

Matt McKinney, Do equal, 50/50 shareholders owe each other fiduciary duties? (

Annette Nellen, Importance of lease terms for desired results. “If you want a particular tax result, be sure the lease agreement supports that result.”

Jana Luttenegger Weiler, NFL Decides to Give up Tax-Exempt Status (Davis Brown Tax Law Blog)


David Brunori, Michigan’s Wrongheaded Approach to Tax Policy. (Tax Analysts Blog):

Advocates of raising corporate taxes are assuming that people will want to stick it to corporate fat-cat shareholders. This is right out of the ‘‘tax the rich and give to the poor’’ playbook. Except in this case, proponents want to tax the rich and give it to construction contractors.

They want to tax the rich to give it to their friends — and that doesn’t mean the poor.


TaxProf, The IRS Scandal, Day 816




Peter Reilly, Judicial Watch Reveals That They Read Tax Blogs At IRS:

At the time Joe Kristan thought that the IRS was wrong to raise the issue and that Senators were right to call the Service to account about it. And this is the part of the document dump that I found most interesting.  Paul Caron summarized Joe’s post  and that was apparently printed out numerous times at the IRS as there are multiple copies in the document dump.

The IRS reads the Tax Update, so you should too!



Tax Roundup, 6/23/15: A foolproof tax prep scam! And more.

Tuesday, June 23rd, 2015 by Joe Kristan

One week left! To file your FBAR Form 114 reports of foreign financial accounts.


ice truckDid a Davenport preparer e-file different returns than he showed his clients? That’s what federal prosecutors allege. They have accused a Davenport man of preparing accurate tax returns for clients, but then e-filing different returns claiming larger refunds, diverting the extra refunds to his own account.

If true, the case is interesting in two ways.

First,It appears to have been based on fraudulent Schedule C sole proprietorship filings. These can be used to create sham losses to create extra refunds, or to create sham earned income to generate earned income tax credit. It was most likely an EITC scam, as fake schedule A deductions work as well for deductions, but not at all for generating refundable EITC.

Second, it was a horrible idea. It’s hard to imagine how he thought he would ever get away with filing returns different from what the client approved. Inevitably there would be a notice or other problem that would bring the scam to light. But the cops don’t spend their days chasing geniuses.


Robert Wood, Record 27 Years Prison For Tax Fraud, Beating Tax Fraud Queen’s 21 Years. The guy allegedly collected 7,000 Social Security numbers and scammed $1.8 in stolen refunds. Considering the hassle he created for the rightful holders of those numbers, that sounds about right.

buzz20141017Robert D. Flach has Tuesday Buzz for you, covering the ground from Trump to Kansas.

William Perez, Tax Advice for Cannabis Entrepreneurs. Speaking of buzz.

Hank Stern, CO-OPs: That flushing sound you hear…  It appears that other Obamacare health co-ops may go the way of Iowa’s CoOportunity.

Keith Fogg, Contrasting the Compromise Standards between the Chief Counsel, IRS and the Department of Justice in Litigated Cases (Procedurally Taxing)

Jack Townsend, Two More Swiss Banks Enter DPAs under US DOJ Swiss Bank Program. Swiss bank privacy is over. Taxpayers who have been counting on it need to check in with their attorneys.


Jeremy Scott, Supreme Court Could Create $353 Billion Deficit Problem (Tax Analysits Blog):

The wait continues for the Supreme Court’s decision in King v. Burwell — the Court did not release the opinion on June 22. If the Court decides in favor of King — basically making residents of 34 states ineligible for healthcare credits — that will gut President Obama’s healthcare reform effort, essentially leaving lawmakers with the choice to either fix or repeal the Affordable Care Act. Republicans are eager to do the latter, but the Congressional Budget Office may have made that more difficult. The CBO says that outright repeal would cost $353 billion over 10 years based on a static scoring model.

It’s a bit strange to think that it’s the Republicans’ responsibility to fix a law that was incompetently drafted by a Democratic Congress. And the House and Senate don’t seem inclined to follow that path anyway. 

It’s not the Supreme Court that would create the problem. It would be the administration and its Congressional allies that passed an unworkable and incoherent lawwith no support at all from the other party.

Kay Bell, No Supreme Court word yet on Obamacare subsidies,
but another part of the health care law is closer to repeal
. “The House voted on June 18 to get rid of the medical device tax.”




Dita Aisyah, Tax Extenders: Take Them or Leave Them, Part 2 (Tax Policy Blog):

Currently, all 50 or so tax extenders are expired for 2015, but Congress will likely pass them retroactively as they have in the past.

Some tax extenders are genuinely good policy, while some are bad. However, the concept of an extender is silly. They create unnecessary uncertainty for individuals and businesses who need to make important long term financial plans.

This very uncertainty creates the need for lobbyists to make annual pilgrimages to Congress to beg for another year of tax breaks. I suspect that Congress likes it that way.


Kyle Pomerleau, Senator Rand Paul’s Payroll Tax Swap. “One striking feature of the tax plan is that it eliminates payroll taxes.”

Bob McIntyre, Detractor Dangles Shiny Objects to Obscure Facts about Rand Paul’s Deficit-Inflating Flat Tax Proposal. (Tax Justice Blog). A left-wing tax site calls the Tax Foundation right-wing.

Steven Rosenthal, The Rich get Richer, with a Little Tax Help (TaxVox).

TaxProf, The IRS Scandal, Day 775. Today’s entry covers a non Tea Party organization whose exemption was stalled because it held views disapproved by the Administration.


News from the Profession. There’s a Lack of Talent to Succeed Accounting Firms Because the Talent Doesn’t Exist (Caleb Newquist, Going Concern). “A recent survey of accounting firm partners from the CPA Consultants’ Alliance found that over half of respondents (51.7%) said procrastination or denial was a primary cause for firms’ succession troubles.”



Tax Roundup, 6/22/15: Iowa shovels more economic development fertilizer. And: Paul flat tax fever!

Monday, June 22nd, 2015 by Joe Kristan


20120906-1It’s getting deep. The giant pile of tax credits for the big Lee County fertilizer plants got a little deeper last week. The Iowa Economic Development Board Friday voted for an additional $21.5 million in tax credits for the project. The Quad City Times compares that appropriation to other state spending:

Iowa’s elected legislators negotiated for five months on Iowa school funding, before reaching a compromise that provided $55 million in one-time money that will only assure the status quo: No one expects improvements.

On Friday, Gov. Terry Branstad’s Iowa Economic Development Board added another $21.5 million in tax credits to the $85 million in state incentives already lavished on a foreign fertilizer company under construction in Lee County.

No legislative vote.

No deliberation by elected officials.

Not even a hint of how this new pile of Iowa taxpayer money will help Iowans. Representatives of the parent firm Orascom, of Egypt, said the $21.5 million in tax credits will add 11 jobs to the 180 expected at the plant.

This latest giveaway brings local, state and federal taxpayer investment to $500 million in the $1.9 billion project. That’s right, taxpayers are covering 25 percent of Orascom’s project.

So almost $2 million per “job.” And that assumes they wouldn’t have completed the project without a little more cash from the state, which is improbable. That’s $21.5 million from those of us without connections at the state to fertilize an already richly-subsidized project. We can be confident that some wee portion of that $21.5 million will go to attorneys and consultants who pulled the strings to make it happen.

The state board also wasted $8 million in tax credits on ribbon cutting opportunities in Sioux City involving a convention center and hotel — which experience nationwide shows will be a fiscal nightmare. Because who better to allocate investment capital than politicians who are spending other people’s money?

Iowa’s cronyist tax credit boondoggle is long overdue for the scrapyard. It lures and subsidizes the influential and the well-lobbied at the expense of their less well-connected competitors and their employees. It’s time for something like the Quick and Dirty Iowa Tax Reform Plan to improve Iowa’s abysmal business tax climate for everyone — not just the cronies.




Russ Fox, Arbitrage Is Legal, But You Better Pay the Taxes. It looks at the tax troubles of a recently-indicted Tennessee politician.

Annette Nellen, Uber, Lyft and others – worker classification in the 21st Century. I used Uber over the weekend visiting my son in Chicago, and it’s pretty slick. It’s also here in Des Moines. A few weekends ago, my other son was playing music in the Court Avenue entertainment district on the street and an Uber driver stopped, got out a guitar, and started jamming with them. That doesn’t sound like an employee to me.

Kay Bell, Tax gift for Father’s Day: help paying for child care

Jason Dinesen, Iowa Adoption Credit and Special-Needs Adoptions

Peter Reilly, Joan Farr Claims IRS Denial Of Exempt Status Is Example Of Persecution Of Christians




Presidential Candidate Rand Paul has proposed a 14.5% flat tax. I haven’t had a chance to study it, but its base-broadening, rate-lowering approach is promising. The Tax Policy Blog looks at the plan in The Economic Effects of Rand Paul’s Tax Reform Plan (Andrew Lundeen, Michael Schuyler) and No, Senator Paul’s Plan Will Not ‘Blow a $15 Trillion Hole in the Federal Budget’ (Kyle Pomerleau). The second one is in response to Bob McIntyre’s post in Tax Justice Blog, Rand Paul’s Tax Plan Would Blow a $15 Trillion Hole in the Federal Budget.

Howard Gleckman, Rand Paul’s Tax Cut Isn’t Quite What It Seems (TaxVox)


TaxProf, The IRS Scandal, Day 771Day 772Day 773, Day 774.

News from the Profession. Ex-BDO CEO’s Quest to Get Firm to Pony Up for His Legal Bills Not Going So Well (Caleb Newquist, Going Concern)




Tax Roundup, 6/11/15: Remember the June 15 deadlines. And: The Bernie Sanders bait and switch.

Thursday, June 11th, 2015 by Joe Kristan


20140728-1Programming Note: No tax roundup tomorrow. See you Monday!


Things that are due Monday: 

– Second Quarter estimated tax payments.

– Returns for filers living abroad

The IRS reminds us Taxpayers with Foreign Assets May Have FBAR and FATCA Filing Requirements in June.


Kyle Pomerleau, How Scandinavian Countries Pay for Their Government Spending (Tax Policy Blog).  This post considers avowed Socialist and quixotic presidential candidate Bernie Sander’s affection for Scandinavian tax and spending policies:

Specifically, Sanders wants the United States to adopt a lot of the spending policies that many of the Scandinavian countries (Denmark, Norway, Sweden) are commonly known to have. Policies such as government sponsored college education, paid parental leave, and universal healthcare.

Many of these new government programs would be expensive and necessitate higher taxes. It is instructive to look at how Scandinavian countries structure their tax systems in order to raise revenue for these programs. Interestingly, some of the ways that Scandinavian countries raise revenue may make Sanders, who is a proponent of highly progressive taxation, uncomfortable.

Two charts from the post tell the story:

High top rates…



…that kick in at much lower income levels than here:



In words, somebody making just a little more than the average income in Denmark pays a 60.4% rate on every additional dollar of income, while you have to make 8.5 times the average U.S. income to hit the top U.S. marginal rate of 39.6%.

A high top tax rate sounds great when it’s being paid by some rich guy you don’t know, but when you pay it, it doesn’t soound so good. That’s the bait and switch behind the spending policies of Bernie Sanders and his ideological soulmates. They tell you that somebody else will pay for all of this bountiful government spending, but the rich guy isn’t buying — he can’t.


Leona May, Accounting Firms Need More Career Options If They Want to Retain Talent (Going Concern):

With partner being the only laudable end goal, no wonder the big accounting firms have become essentially an accounting industry training ground. Firms pay to train us, and then we jump ship after a few years if that shinin’ disco light partner standard does not jibe with our long-term career aspirations.

The failure to retain good employees who don’t want equity is an expensive failure for our industry.


Robert D. Flach says SEE YOUR TAX PRO FIRST! “Very, very important – if you are considering entering into a business enterprise visit your tax professional and your accountant (if not the same person or firm) before you visit your attorney.”

Hank Stern, Centennial State HIX Hiccups (InsureBl0g). On the ugly state of Colorado’s ACA exchange.

Robert Wood, IRS Still Isn’t Ready For Obamacare, Says Watchdog

Carl Smith, Is The Tax Court an Agency or a Court for FOIA Purposes? (Procedurally Taxing)

Kay Bell, NYC attorney pleads guilty to amended tax return fraud. If the tax agency asks you why you haven’t filed your tax returns, filing fraudulent ones is an unwise response.

Jack Townsend, The Vatican Signs On To FATCA

Andrew Mitchel, U.S. Government Continues to Pursue Taxpayers Committing Tax Fraud




TaxProf, The IRS Scandal, Day 763. Today’s link puts the Tea Party scandal in its context as part of the larger movement to regulate (and, inevitably, restrict) free speech via campaign finance “reform.”

Renu Zaretsky, “The Waiting Is the Hardest [and Most Constant] Part”  Today’s TaxVox headline roundup covers the IRS funding standoff and the continuing Kansas budget fight, among other things.

Cara Griffith, Are REITs Paying Their Fair Share to States? (Tax Analysts Bl0g)

Carl Davis, Sales-Tax-Free Purchases on Amazon Are a Thing of the Past for Most (Tax Justice Blog). “Effective June 1, Amazon is now collecting sales taxes in fully half the states that are collectively home to over 247 million people, or 77 percent of the country’s population.”


This could catch on a lot better than that Irwin Schiff stuff. Austrian Brothel Offering Free Sex And Drinks In Tax Protest



Tax Roundup, 6/8/15: Hush money edition. And: IRA invests in IRA owner’s business, disaster ensues.

Monday, June 8th, 2015 by Joe Kristan
"Dennis Hastert 109th pictorial photo" by United States Congress - Licensed under Public Domain via Wikimedia Commons

“Dennis Hastert 109th pictorial photo” by United States Congress – Licensed under Public Domain via Wikimedia Commons

The TaxProf and I are cited in a New York Times article on the tax implications of former House Speaker Hastert’s hush money scandal: If Hastert Was Extorted, He Could Deduct Some Losses From His Taxes.

Mr. Hastert has been indicted on charges of “structuring” deposits to avoid reporting rules as part of a plan to pay for silence from “Individual A” for alleged sexual contact pre-Congress. From the article:

While extortion payments would be taxable for Individual A, they would actually be partly deductible for Mr. Hastert, said Paul Caron, a tax law professor at Pepperdine University. It’s right there in I.R.S. Publication 17, Chapter 25: You get to deduct losses because of theft, to the extent those losses exceed 10 percent of your adjusted gross income. Blackmail and extortion count as theft.

But to claim the deduction, Mr. Hastert would have to convince the I.R.S. or a court he had been extorted, which could be difficult.

”Sometimes judges will find a way to disallow deductions for what they find unsavory behavior,” said Joe Kristan, a tax accountant with the Roth C.P.A. firm. He noted a case in which a divided Ninth Circuit panel denied a tax deduction for extortion to a man who said he paid hush money to his mistress.

For the record, I have no personal experience in deducting extortion and hush money payments.

Related: Jack Townsend, Article on Structuring to Avoid Bank Currency Reporting Requirements, on the structuring charges of the Hastert case.


No Walnut STTaxpayer’s IRA-owned corporation leads to tax disaster. The Eighth Circuit appeals court has upheld horrendous tax penalties against a taxpayer who had an IRA capitalize his business as an investor.

A Mr. Ellis rolled his 401(k) plan into an IRA, which invested about $310,000 in CST, a C corporation. CST started an auto dealership and employed Mr. Ellis as General Manager. That led to unfortunate tax results. From the court opinion (my emphasis):

The tax court properly found that Mr. Ellis engaged in a prohibited transaction by directing CST to pay him a salary in 2005. The record establishes that Mr. Ellis caused his IRA to invest a substantial majority of its value in CST with the understanding that he would receive compensation for his services as general manager. By directing CST to pay him wages from funds that the company received almost exclusively from his IRA, Mr. Ellis engaged in the indirect transfer of the income and assets of the IRA for his own benefit and indirectly dealt with such income and assets for his own interest or his own account. See 26 U.S.C. § 4975(c)(1)(D), (E); 29 C.F.R. § 2509.75-2(c) (“[I]f a transaction between a party in interest and a plan would be a prohibited transaction, then such a transaction between a party in interest and such corporation . . . will ordinarily be a prohibited transaction if the plan may, by itself, require the corporation . . . to engage in such transaction.”)

While the investment itself wasn’t ruled a prohibited transaction, things got messy once the IRA-owned corporation started paying Mr. Ellis a salary — an “indirect transfer” occurred.

The consequences? The prohibited transaction terminated the IRA. That means the whole value of the IRA became taxable income, with no cash made available to cover the taxes. With penalties, the bill will exceed $160,000.

The Moral? Direct business investments from IRAs are dynamite. If you must use retirement plan funds for a business start-up, it may be wiser to take a taxable withdrawal and use the after-tax funds to make the investment. If there is any way to fund it without retirement plan funds, that would be wiser still.

Cite: Ellis, CA-8, No. 14-1310 

Prior coverage here.


20150528-1Margaret Van Houten, Legislature Passes Bill Affecting Iowa Trusts and Estates (Davis Brown Tax Law Blog).  “Beginning on July 1, 2016, a step grandchild will no longer be subject to Iowa Inheritance Tax.  Currently, direct ancestors and descendants, including stepchildren, were exempt from the tax, while step grandchildren were grouped with other individuals, such as siblings, nieces and nephews and unrelated individuals and were subject to the tax.”

TaxGrrrl, The Not So Skinny On National Doughnut Day. That’s every day!

Jason Dinesen, Breakeven Analysis for Small Businesses — Service Providers and Not-for-Profits

Annette Nellen, More on marijuana businesses and tax ethics. “Despite state actions, the production, sale and use of marijuana is a crime under federal law. Thus, for licensed practitioners, there is concern about ethical violations of helping someone commit a crime.”

Kay Bell, H&R Block explores virtual tax preparation.

Peter Reilly, A New York Day Is Like A New York Minute At Least For Taxes:

In the case of John and Janine Zanetti, the New York Supreme Court Appellate Division agreed with the Commissioner of Taxation and Finance that a New York day can be less than 24 hours.  The point of the decision was to determine whether the Zanettis had spent enough time in New York to be considered statutory residents for the year 2006.


Jim Maule asks Is the Federal Income Tax Progressive? He focuses on the “low” federal effective rate on the “Top .001%.” Of course, the reason people get to those rates is normally because of a one-time event, typically the sale of a corporation, that is taxed at long-term capital gain rates. Such taxpayers are normally at that income level only once in their life. Of course, Prof. Maule ignores the built-in double tax hidden in these figures.

Leslie Book, DC Circuit Criticizes Government in Case Alleging an Israel Special Policy for Tax Exemptions (Procedurally Taxing). “As IRS has increased responsibility beyond its paramount mission of collecting revenues, the historical reasons for the discretion IRS has exercised have lessened.”

Robert Wood, Are On Demand Workers Independent Contractors In Name Only?

Tony Nitti, Put It On The Card! Congressman Proposes To Make Credit Card Debt Forgiveness Tax Free

Russ Fox, Another Las Vegas Preparer Gets In Trouble Over the Foreign Earned Income Exclusion. “I’d say it was something in the water but Las Vegas is in a desert.”




TaxProf, The IRS Scandal, Day 758Day 759Day 760. The IRS treatment of the Tea Partiers is compared and contrasted with that of the Clinton Foundation.


Arnold Kling, Payroll Taxes in Europe. ” I find it hard to reconcile Germany’s relatively low unemployment rate with this high payroll tax rate.”

David Henderson responds:

I don’t find it hard to reconcile the two. The reason: Germany has had high payroll tax rates for a long time–for decades, actually. So real wages have had a long time to adjust.

I understand this as saying the total employment cost is about the same, but the employee gets less of it.


Kyle Pomerleau, CRS Outlines Four Important Aspects of the EITC. “The EITC enjoys bipartisan support among lawmakers. This is due to the fact it both reduces poverty among families with children and has a positive impact on the labor force for certain individuals. Yet, the EITC is not without its flaws. It’s benefit phase-out has a negative impact on the labor force and it suffers from high error rate and overpayment.”

Richard Auxier, Choose your tax system: progressive vs. regressive (TaxVox). A critique of the “Fair Tax” and other national sales tax proposals.


News from the Profession. Pope Figured The Lord’s Work Could Use a Good Auditor (Caleb Newquist, Going Concern)




Tax Roundup, 5/22/15: IRS to refund RTRP test fees. And: Memorial Day!

Friday, May 22nd, 2015 by Joe Kristan


Memorial Day weekend!. As most offices will be deserted by 3 p.m., let’s get started. And while you are getting ready for the long weekend, remember that late this afternoon is a great time to get embarrassing news out, while nobody’s watching. The politicians know this.

20130121-2IRS to refund RTRP test fees. From an IRS announcement:

The IRS is refunding the fees that return preparers paid for the Registered Tax Return Preparer test. Letters will be mailed to refund recipients on May 28 and checks will be mailed on June 2. Return preparers took the test between November 2011 and January 2013 and paid a fee of $116. About 89,000 tests were paid for and taken, with some preparers taking the test more than once.

Mighty nice of them. But they have an ominous warning:

The IRS remains committed to the principle that all persons who prepare federal tax returns for compensation should be required to pass a test of minimal competency and take annual continuing education training.

In other words, they will continue to try to sneak preparer regulation through the back door. When the people who pass the tax laws have to pass a test of minimal competency, come back to me with your time-wasting paperwork, IRS.


buzz20140923Robert D. Flach rounds up tax happenings in his Friday Buzz!

Mitch Maahs, Tapping into Beer Tax Reform (Davis Brown Tax Law Blog):

As the craft beer industry continues to boom, the margins of many craft breweries have continued to tighten. Representatives of the industry have taken to Congress to seek tax breaks for these small brewers, but the large, multinational beer giants also want a pour from the tax-break tap.

Currently, all brewers pay a federal excise tax, per 31-gallon barrel (about 248 pints), based on the volume the brewer produces or imports. On its first 60,000 barrels brewed or imported, breweries pay $7.00 per barrel. The tax increases to $18.00 for each additional barrel above 60,000.

Excise taxes should work like user fees, paying for costs generated by the beer consumers. That’s not what this tax does.

Let’s shop! Memorial Day sales tax holidays for Texas, Virginia shoppers (Kay Bell)

William Perez talks about 3 Types of Tax Form 5498 (and Why You Got One): “Essentially, Form 5498 provides independent confirmation to the IRS of the amounts you contributed to IRAs and other tax-preferred savings accounts.”





Jack Townsend, GE Gets Slapped Down Again for its B*****t Tax Shelter.

Peter Reilly, Kent Hovind To Be Free In August – Maybe Sooner. His pet velociraptor will be glad to see him.

Kyle Pomerleau, Bernie Sanders’s Financial Transaction Tax Won’t Raise as Much Revenue as He Thinks (Tax Policy Blog):

In the 1980s, Sweden introduced a financial transactions tax. As expected, the tax reduced trade volume: “when the 2% tax was introduced in 1986, 60% of the trading volume of the 11 most actively traded Swedish share classes migrated to London to avoid taxes.”

Of course, the Sanders response to such failure would be to “crack down.”




Renu Zaretsky, Robbing Peter to Pay Paul. Today’s TaxVox headline roundup talks about a push to make bike riders pay for their bike trails, as well as the continuing fiscal turmoil in Kansas.

TaxProf, The IRS Scandal, Day 743

News from the Profession. 34-Count Indictment Won’t Stop Accountant from Serving His Clients: Lawyer. (Caleb Newquist, Going Concern). If he’s convicted, though, that just might stop him.



Tax Roundup, 5/20/15: April 15 is on April 18 next year. And: exit > voice.

Wednesday, May 20th, 2015 by Joe Kristan

20140805-3It looks like we’ll be working an extra weekend next April. Thanks to the puzzling rules regarding the observance of Emancipation Day in Washington D.C., the deadline for 1040s next year will be April 18 – even though April 15 falls on a Friday. Residents of Massachusetts and Maine get even one more day. From Rev. Rul. 2015-13:

The District of Columbia observes Emancipation Day on Friday, April 15 when April 16 is a Saturday. This makes Monday, April 18, the ordinary due date for filing income tax returns. However, in this situation, Monday, April 18, is the third Monday in April, the date that Massachusetts and Maine observe Patriots’ Day. Because residents of Massachusetts and Maine may elect to hand carry their income tax returns to their local IRS offices, A (a Massachusetts resident) has until the next succeeding day that is not a Saturday, Sunday, or legal holiday to file A’s income tax return. Thus, A has until Tuesday, April 19, to file A’s income tax return.

I suppose I will appreciate the extra time when the deadline comes, but I would really just as soon get it over with.

Kay Bell has more.


Update on Iowa effects of Wynne decision. The Iowa Department of Revenue public information officer responded to my inquiry about the state’s reaction to Monday’s Supreme Court decision requiring states to allow a credit on resident individual returns for taxes paid in other states: “We are in the process of reviewing the decision.”

Not surprising, as it is a new decision. If you have a refund statute of limitations expiring soon, don’t wait on their guidance to file a protective refund claim for income taxes paid in non-Iowa municipalities.


20150504-2Alito on the limits of politicsThe dissent in Wynne said that Maryland resident taxpayers afflicted with a discriminatory double tax on out-of-state income shouldn’t have prevailed becasue they had recourse to the ballot box to protect their interests. Writing for the majority, Justice Alito pointed out that this does little good (my emphasis):

In addition, the notion that the victims of such discrimination have a complete remedy at the polls is fanciful. It is likely that only a distinct minority of a State’s residents earns income out of State. Schemes that discriminate against income earned in other States may be attractive to legislators and a majority of their constituents for precisely this reason. It is even more farfetched to suggest that natural persons with out-of-state income are better able to influence state lawmakers than large corporations headquartered in the State. In short, petitioner’s argument would leave no security where the majority of voters prefer protectionism at the expense of the few who earn income interstate.

This is actually a powerful argument to limit the role of government in the first place. One voter has negligible power to overthrow unfair legislation. In the one-party rule typical of large American cities, political activity for a minority view is futile, Jim Maule notwithstanding.

20140513-1Arnold Kling points out how market institutions, which hold no elections but allow choice, can actually be more empowering for an individual:

Neither my local supermarket nor any of its suppliers has a way for me to exercise voice. They don’t hold elections. They don’t have town-hall meetings where they explain their plans for what will be in the store. By democratic standards, I am powerless in the supermarket.

And yet, I feel much freer in the supermarket than I do with respect to my county, state, or federal government. For each item in the supermarket, I can choose whether to put it into my cart and pay for it or leave it on the shelf. I can walk out of the supermarket at any time and go to a competing grocery.

The exercise of voice, including the right to vote, is not the ultimate expression of freedom. Rather, it is the last refuge of those who suffer under a monopoly.

He argues  that we should be able to choose governing institutions more like we choose other service providers:

In fact, if we had real competitive government, then we would be no more interested in elections and speaking out to government officials than we are in holding elections and town-hall meetings at the supermarket.

He makes this argument more detail in his book Unchecked and Unbalanced). Somehow I don’t think that will go over well with our current officeholders.



Russ Fox, The Real Impact of the Wynne Decision: “However, many states do not give credits for local taxes. Joe Kristan highlighted Iowa today; Kentucky is another state that does not currently offer such tax credits. Under Wynne I believe they’ll be required to offer such credits.”


Taxpayers are required to keep separate track of acquisition debt and home equity debt, to make sure that the deduction on Schedule A does not include interest on debt principal that exceed the statutory maximums ($1 Million for acquisition debt and $100,000 for home equity debt – no limit on grandfathered debt), and to determine what interest deduction to add back on Form 6251 when calculating Alternative Minimum Taxable Income.

I firmly believe that 99.5% of taxpayers do not do this. I do not know of any taxpayer who does.

The clients don’t, but that doesn’t mean preparers shouldn’t watch out for these items. When taxpayers have interest on multiple home loans, or very high home interest deductions, alert preparers have to ask questions to make sure the deductions and AMT are determined correctly.

Annette Nellen, Filing season tax updates

Robert Wood, Floyd Mayweather Gambles, Wins, Pays IRS:




Another ACA Co-op on the ropes? Hank Stern reports at Insureblog that the Kentucky health care cooperative is insolvent. That means it may go the way of Iowa’s short lived and expensive catastrophe Co-Oportunity.


Jeremy Scott, Hawkins Casts Powerful Shadow Over OPR (Tax Analysts Blog):

Hawkins will probably always face at least some criticism because of the overreach of the preparer regime, and some accusations that she was too favorable to the large practitioner groups such as the ABA and the American Institute of Certified Public Accountants. But she should more properly be remembered as the person who brought coherence to IRS Circular 230 enforcement and essentially rebuilt OPR from scratch.


In fairness, the preparer regulation overreach was decided above her level.


Scott Sumner, A consumption tax is a wealth tax (Econlog). “For any income tax regime, there is a consumption tax regime of equal progressivity. Unfortunately that equally progressive regime will look much less progressive. This is one of the biggest barriers to tax reform.”

Kyle Pomerleau, What are Flat taxes? (Tax Policy Blog):

When most people hear “Flat Tax,” they usually think a tax system with one, flat tax rate on all income. They also imagine a tax system with little or no deductions or credits. While this is a possible way to design a flat tax, it is not what makes a flat tax a flat tax. The key to a flat tax goes beyond its rates. The key is that it is a consumption tax. You would not call a low-rate tax on all transactions in an economy a flat tax, even though it had one, flat rate.





Howard Gleckman, Are GOP Presidential Candidates Downplaying Tax Cuts Or Hiding The Ball? Referring to Joseph Thorndike, he says: “Joe, who is very much in the watch-what-they-do-not what-they-say (WWTDNWTS) camp, noted that while few GOP presidential hopefuls are talking about tax cuts, many of their proposals are, in fact tax cuts.”

TaxProf, The IRS Scandal, Day 741


Caleb Newquist,  “Just Ask the Guy” Not Always a Futile Fraud Detection Method (Going Concern).  Not foolproof, though.



Tax Roundup, 4/2/15: For gift deductions, it’s not just the thought that counts. It’s the paperwork. And: more!

Thursday, April 2nd, 2015 by Joe Kristan

salvation armyToday’s filing season tip: assemble your contribution documents. For some things, spending the money isn’t enough to put a deduction on your return. You also have to get the paperwork right.

Charitable contributions are very much in this category. And it’s not good enough to find some paperwork when the IRS examiner starts asking questions. You need the documents in hand before you file your return.

For cash contributions of $250 or more, you need to have, in the words of IRS:

…a contemporaneous written acknowledgment from the qualified organization indicating the amount of the cash and a description of any property contributed. The acknowledgment must say whether the organization provided any goods or services in exchange for the gift and, if so, must provide a description and a good faith estimate of the value of those goods or services. 

That’s true whether you give cash or property. That means if you don’t have a nice note from your donee for your $250 gift, you need to bug them until they give you one. It also means that if you claim a deduction for dumping a bunch of household goods at Salvation Army, you need to get a note from them with a list of the items donated and the “goods or services” statement.

You need an appraisal if you donated property (other than publicly-traded securities) to charity for deductions starting at $5,000. We will talk about that tomorrow.

For more information, See Topic 506 – Charitable Contributions at

Come back every day through April 15 for another 2015 filing season tip!


Russ Fox, Bozo Tax Tip #8: Be Frivolous! “Tax Court judges don’t have the same sense of humor that I do about frivolous arguments.”


atombombAmanda Athanasiou at Tax Analysts reports ($link), FATCA: Swatting Flies With Atom Bombs:

Possible inflation of the offshore tax evasion problem and the staggering costs of the Foreign Account Tax Compliance Act are causing even the most ardent advocates of information sharing and ending bank secrecy to question the U.S. approach.

“For the U.S. to ask countries around the world to spend billions in implementation costs to deliver less than $1 billion per year is, economically, complete nonsense,” said Martin Naville, CEO of the Swiss-American Chamber of Commerce. He referred to FATCA as the least considered program in history and “mind boggling” in its unilateralism. “The net value of FATCA for the U.S. is probably negative,” said Naville, who added that tax compliance is a must but that there are better ways to achieve it.

But it goes after Fat Cats! Don’t you get our clever pun? And besides, how can we go after international money launderers without making it a crime to commit personal finance abroad?

Related: Wall Street Journal, Checking the IRS Overseas (Via the TaxProf). “Even the Obama Administration says the law would capture only $870 million a year in additional tax revenue, which is probably overstated given changes in behavior by Americans and their overseas employers.”




William Perez, Do Your Home Improvements Qualify for the Residential Energy Tax Credits?

TaxGrrrl, Taxes From A To Z (2015): T Is For TIN (Taxpayer Identification Number)

Peter ReillyZombies Can’t File Tax Court Petitions. Making Tax Court headquarters the go-to place for a Zombie Apocalypse.

Kay Bell, IRS’ Koskinen says tax agency’s troubles are over. No joke. Joke.

Kristine Tidgren, Don’t Be Fooled! “While many artless tactics remain (if you just wire this money to Nigeria by Friday…), the emerging scams come wrapped in a cloak of credibility. It’s often difficult for even the wary to separate fact from fiction in this new age.”


TaxProf, The IRS Scandal, Day 693. “The Department of Justice announced yesterday that it will not pursue contempt of Congress charges against Lois Lerner.”  Of course not. That’s not what a scandal goalie does.

Marc Bellemare, Soda taxes don’t seem to work. (via Tyler Cowen)

Renu Zaretsky, A Penny for Your Sugar: Setting a Price on Sin. (TaxVox). “Are we are all aware of our sugar sins?”  Sins? So food nannyism is really a religion.

Not that the current tax law is exactly a shining light.  Ted Cruz and His Dim-Bulb Tax Policy (Joseph Thorndike, Tax Analysts Blog). “Increasingly, Washington is alive with interesting, conservative tax proposals. But none of them are coming from the junior senator from Texas.”

Meg Wiehe, More Than 20 States Considering Detrimental Tax Proposals (Tax Justice Blog). Pretty close to 50, I’d guess.




Christopher Bergin, April Is More Than Just Tax Season (Tax Analysts Blog). “Koskinen announced that so far, the filing season has gone “swimmingly,” which apparently means the IRS answers the phone less than half the time when taxpayers call for help.” 

Today in advanced tax policy debate: How Tax Brackets are Adjusted Explained in Taylor Swift Gifs (Kyle Pomerleau, Dan Carvajal, Tax Policy Blog)


News from the Profession. Deloitte Not Taking Any Chances That Someone Might Burn Their Disneyland to the Ground (Caleb Newquist, Going Concern).



Tax Roundup, 3/25/15: Why the casino may not be the place to invest those millions from that Chinese guy.

Wednesday, March 25th, 2015 by Joe Kristan

In the movies, an American who is entrusted with millions from a Chinese shipping magnate, but blows it at casinos, would face unimaginably dire consequences. In real life, he faces the IRS.

20120511-2That’s the story in a weird Tax Court case decided yesterday. The shipping magnate, a Mr Cheung, had fared poorly as an investor. He met a Mr. Sun from Texas and decided that he might be better at investing. He shipped the money to a C corporation and an e-Trade account owned by Mr. Sun, under a handshake deal with fuzzy terms. Judge Paris explains:

The only part of the arrangement that both Mr. Cheung and Mr. Sun consistently agreed on was the general structure of the investment. Mr. Cheung would transfer sums of money through his shipping companies’ bank accounts to Mr. Sun, who would then invest the money in the United States. Mr. Cheung would decide how much money he wished to send, and Mr. Sun had discretion on which investments to pursue with Mr. Cheung’s money.

The remaining terms of the verbal agreement were not memorialized and are unclear. Specifically, Mr. Sun and Mr. Cheung inconsistently described the investment term, the expected return, and enforcement provisions. Mr. Sun believed the term was a minimum of 5 years and did not give a maximum period, whereas Mr. Cheung believed the term was 7 to 10 years. The expected return is also unclear; Mr. Sun believed the return on investment would be a 50-50 split of the net profit with a minimum 10% gain annually, but the return might not be paid annually. Mr. Cheung believed the return would be 10% to 15%, but was uncertain whether that return was annual or total.

Not the sort of investment arrangement Suze Orman or Dave Ramsey would embrace. Nor would they embrace some of the “investments” described in the Tax Court case.

The funds sent to Mr. Sun’s C corporation went into an “officer loan account” for Mr. Sun. And then… well, again from Judge Paris (emphasis mine):

Mr. Sun would either pay his personal expenses directly from the officer loan account or he would remove money and use it at his discretion. For example, in 2008 Minchem paid $135,874.43 for home automation, $158,517.80 for a new Mercedes Benz, and $49,598.81 for personal real estate tax. In total, Minchem’s officer loan account was debited $4,116,414.43 in 2008 and $1,811,127.65 in 2009 for expenses that Mr. Sun identified as personal during his trial testimony.

Some of the personal expenditures included gambling expenses. In 2008 $4,800,100 was transferred to casinos from the officer loan account and $2,394,550 was returned. In 2009 $1 million was transferred to casinos and $1,300,000 was returned. Thus between 2008 and 2009 Mr. Sun transferred $5,800,100 from the officer loan account to casinos and received back $3,694,550; i.e., over the two years in issue Mr. Sun lost $2,105,550 from gambling from the officer loan account.

20120801-2Judge Paris said that the funds never belonged to the C corporation because it was a mere conduit for the cash; that meant the corporation was not taxable on the amounts.

Mr. Sun didn’t get off so easy. Judge Paris said that the funds became income to Mr. Sun when he began spending them for his own purposes (citations omitted):

Whether funds have been misappropriated is a question of fact, but facts beyond “dominion and control” must be considered. More specifically, an individual misappropriates funds when money has been entrusted to the individual for the sole purpose of investing and the individual instead uses the money for personal activities.

Mr. Sun undisputedly treated as his own money held for Mr. Cheung’s benefit and specifically earmarked for investment purposes. For example, Mr. Sun used some of the funds to purchase a personal automobile and a home automation system. Perhaps the most obvious example of Mr. Sun’s misappropriation of the funds is his gambling activities.

The opinion dismissed the idea that the funds were loans because there was no documentation of any sort of loan agreement or terms. The court said that the amounts weren’t gifts because no Form 3520, where U.S.  taxpayers report large foreign gifts, was filed, and because there was no evidence of an intent to make a gift.

While the Tax Court ruled that Mr. Sun misappropriated the money, it ruled that the IRS failed to prove fraud. That meant the penalties were only 25% of the roughly $4.7 million of additional tax, rather than the 75% under the civil fraud rules.

The Moral? Hard to say. Don’t squander millions of dollars entrusted to you for investment at casinos? You didn’t need the Tax Court to tell you that. Maybe it’s a handy reminder to file Form 3520 if you receive large foreign gifts, lest the IRS get the wrong idea (and lest they hit you with a $10,000 penalty for not filing it). And if you have had bad luck with your investments, maybe index funds are a better way to go than a handshake deal with some guy in Texas.

Cite: Minchem International, Inc., et. al., T.C. Memo 2015-56.


Kyle Pomerleau, U.S. Taxpayers Face the 6th Highest Top Marginal Capital Gains Tax Rate in the OECD (Tax Policy Blog):



The United States currently places a heavy tax burden on saving and investment with its capital gains tax. The U.S.’s top marginal tax rate on capital gains, combined with state rates, far exceeds the average rates faced throughout the industrialized world. Increasing taxes on capital income, as suggested in the president’s recent budget proposal, would further the bias against saving, leading to lower levels of investment and slower economic growth. Lowering taxes on capital gains would have the reverse effect, increasing investment and leading to greater economic growth.

But, but, the rich!


IMG_1388William Perez covers Various Types of Individual Retirement Accounts.

Paul Neiffer, Tax Court Allows $11 Million Horse Loss to Stand. “Now, though this is a victory for the taxpayer in Tax Court, they are still out over $11 million in losses (or more).  I am not sure if it really is an overall win for the taxpayers.”

TaxGrrrl, Taxes From A To Z (2015): M Is For Municipal Bonds.

Jason Dinesen discusses Recordkeeping Considerations for a Startup Business.

Roger McEowen, USDA Releases Proposed Definition of “Actively Engaged in Farming” That Would Have Little Practical Application. Sounds useful.

Kay Bell, $42 million Montana mansion owner loses property tax fight. Looks like a nice place.

Jim Maule, When Social Security Benefits Aren’t Social Security Benefits: When They Meet Tax. “By reducing social security benefits on account of the state retirement system benefit payments, the Congress causes the portion of the taxpayer’s overall retirement receipts that is treated as taxable pension payments to increase, which in turn not only increases gross income on its own account but generates gross income from a portion of the social security benefits.”

Joni Larson, Proposal to Amend Section 7453 to Provide that the Tax Court Apply the Federal Rules of Evidence (Procedurally Taxing)


Tony Nitti, Ted Cruz To Run For President: Why His Plan For A Flat Tax May Doom His Candidacy:

Whether a move to a much more regressive system than the one currently in place is ultimately in the best interest of the economy and country is irrelevant; the Democrats will seize on the shift in the tax burden and continue to paint Republican candidates as seeking only to placate the rich.

I think Hillary Clinton, or whoever the nominee is, will do that to any Republican opponent, regardless of any actual policy positions. The question is whether they will be able to more successfully deal with the issue than Mr. Romney.

Robert Wood, Taxing Stephen King, Taylor Swift And Phil Mickelson




Renu Zaretsky, Tax Struggles and Tax Sneaks. Today’s TaxVox headline roundup has stories about how Orrin Hatch wants tax reform and John Koskinen wants more money.

David Brunori, Louisiana Tax Reform: Some Smart Guys Worth Listening To (Tax Analysts Blog)

TaxProf, The IRS Scandal, Day 685.  Today’s post features Media Matters, living proof that the IRS concern over political activity was rather selective.


Career Corner. Confirmed: Golf More Difficult Than CPA Exam (Caleb Newquist, Going Concern). But almost as much fun!



Tax Roundup, 3/17/15: St. Patrick didn’t chase the taxes out of Ireland.

Tuesday, March 17th, 2015 by Joe Kristan

20150317-1aTax luck of the Irish. While America celebrates Irish heritage by today by drinking far too much bad dyed beer, we’ll ponder the sober look taken by Kyle Pomerleau at the Irish tax system (my emphasis):

It may be surprising to Americans to hear that Ireland has pretty high taxes. We usually hear about Ireland’s tax system in the context of its corporate income tax rate, which sits a low 12.5 percent, half the average rate of the OECD. We are led to believe that Ireland is a low-tax country in general.

In reality, Ireland’s tax code has some of the highest marginal tax rates, especially on income, in the OECD.

Ireland’s top marginal individual income tax rate is 40 percent on individuals with incomes over 33,800 EUR ($36,236).  On top of that, individuals need to pay payroll taxes of 4 percent on wages and other compensation. Ireland also has “Universal Social Charge,” which tops out at 8 percent (11 percent for self-employed individuals).

Altogether, the top marginal tax rate in Ireland is 52 percent. The average top marginal income tax rate (plus employee-side payroll taxes) is 46 percent in the OECD. Not only is this rate high, it applies at a relatively low level of income ($40,174).

It’s enough to make me glad great-great-great Grandpa took off for North America in the 1840s.*

The tax rate is also high on investment income. Capital gains are taxed at 33 percent, which is significantly higher than the OECD average of about 18.4 percent. Dividends are taxed at ordinary income tax rates of 40 percent plus the 8 percent Universal Social Charge (48 percent).

The US top marginal rate, excluding state taxes, is about 44.588%, considering phase-outs and the Obamacare 3.8% Net Investment Income Tax, but it doesn’t kick in until taxable income reaches $406,750 for single filers and $457,600 on joint returns. Our fully-loaded top capital gain and dividend rate is 19.25%. So if you must drink something, drink to having a less awful top marginal rate than Ireland.

*OK, technically he came from County Tyrone, which is in the U.K., not the Republic of Ireland.


daydrinkersMaria Koklanaris reports on a study by the left-side policy shop Good Jobs First (Tax Analysts $link):

There are 11 companies listed in both the top 50 state and local subsidy recipients and the top 50 federal subsidy recipients. They are Boeing, The Dow Chemical Co., Ford Motor Co., General Electric, General Motors, JPMorgan Chase & Co., Lockheed Martin Corp., NRG Energy Inc., Sempra Energy, SolarCity, and United Technologies.

Also, six companies on the top 50 state list are on the list of the top 50 recipients of federal loans, loan guarantees, and bailout assistance — Boeing, Ford Motor, General Electric, General Motors, Goldman Sachs, and JPMorgan Chase. Five companies — Boeing, Ford Motor, General Electric, General Motors, and JPMorgan Chase — are on all three lists.

All companies you just feel good about when you pay extra taxes, so they can pay less. Especially GE and JPMorgan Chase.


Christopher Bergin, The IRS Doubles Down on Secrecy (Tax Analysts Blog):

Faced with blistering criticism over how it handled exemption applications, accusations that it wrongly – and, perhaps, even criminally – withheld e-mails from lawmakers and the public, and rising concerns that it is the most secretive government agency we have, what is the Internal Revenue Service’s response?

To become even less transparent. As the saying goes: You can’t make this stuff up.

I think the evidence can lead to only two conclusions about the current IRS commissioner: either he is the most tone-deaf and socially-unskilled administrator in the Federal government, or he wants to make the IRS as unaccountable as possible.


TaxProf, The IRS Scandal, Day 677. IRS, fighting transparency tooth and nail.


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.

Peter Reilly, Don’t Sic IRS On Racist Frat Boys. “Nobody ever suggests that the Equal Employment Opportunity Commission or the Department of Education should pitch in and help collect taxes, but for some reason the IRS is seen as the Swiss army knife of social policy, ready to further shred its tattered reputation addressing issues that stump other institutions.”



William Perez, Need to File a Year 2011 Tax Return? Deadlines and Resources

Kay Bell, Filing tips for the 2015 tax deadline that’s just a month away

TaxGrrrl, Taxes From A To Z (2015): I Is For Insolvency. And Illinois, but that’s the same thing.

Robert Wood, Of Obamacare’s Many Taxes, What Hurts Most. So many choices.

Stephen Olsen, Summary Opinions for week ending 02/27/15 (Procedurally Taxing). A roundup of developments in the tax procedure world.

Russ Fox begins his last part of tax season hibernation. Take care of yourself and your clients, Russ. I’ve been tempted to hibernate myself, but since now is when people are most interested in this stuff, I keep at it.


Picture by Dan Kristan

Picture of Irish countryside by Dan Kristan


Richard Auxier, Can Rube Goldberg Save the Highway Trust Fund? (TaxVox). “In principle, the Highway Trust Fund (HTF) is simple. Drivers pay a federal gas tax when they purchase fuel, the revenue goes to the HTF, and the federal government sends the dollars to states and local governments for highway and transit programs. But in practice the system is a mess and a new proposal by a road builder trade group shows just how tangled this web has become.”

News from the Profession. Accountants Share Their Dreams. (Caleb Newquist, Going Concern)



Tax Roundup, 3/13/15: Making the ultimate sacrifice to tax administration. And: Tax Sadist Tourism!

Friday, March 13th, 2015 by Joe Kristan

“SPA51928” by Jan Leineberg – Own work. Licensed under Public Domain via Wikimedia Commons –

Maybe I should leave my office door open. A tax office official in Finland who died at his desk was not found by his colleagues for two days (BBC, via the TaxProf):

The man in his 60s died last Tuesday while checking tax returns, but no-one realised he was dead until Thursday.

The head of personnel at the office in the Finnish capital, Helsinki, said the man’s closest colleagues had been out at meetings when he died.

He said everyone at the tax office was feeling dreadful – and procedures would have to be reviewed.

Procedures? Like what? I can see the memo now:

To: All Employees

From: Pekka Raanta, HR director

Re: New Procedures

The recent unfortunate incident involving our dear colleague highlights a need for new procedures for preventing a recurrence of the incident. The presence of unauthorized dead in the office poses both safety and administrative issues.

To ensure early deduction of deaths among our colleagues, we will initiate the following MANDATORY daily procedures.

1. The office manager is to begin each day by kicking all employees. The receptionist will kick the office manager. Should they not respond, please complete form HR-6-MORT.

2. At 10 am and 2 pm each day, we will have a roll call. THIS IS IMPORTANT. Please do not answer the roll for an absent colleague, as this could inadvertenly conceal a death.

3. Buddy system. You will be assigned a “death buddy” by the H.R. Department. You and your death buddy will be responsible for continuous respiration monitoring. Should you go on break or to the restroom, IT IS YOUR RESPONSIBILITY TO SECURE A SUBSTITUTE. You are also responsible for making mutually satisfactory arrangements to vacation together.

4. ALL EMPLOYEES are required to attend training to enable you to identify dead colleagues. Warning signs such as unusually low productivity and wearing the same outfit for consecutive days will be covered. We realize that it can be difficult to distiguish between the productivity of the dead and the normally-functioning, but there are important signs to look for.

Pihla will complete our colleague’s final time report. Please charge the final two days to “diversity training.” 

I wonder if there is a Purple Heart for tax officials who die at their desks. TaxGrrrl has more on this important story.


Foggy Friday at Principal Park. Opening day looms in the fog, April 17!

Foggy Friday at Principal Park. Opening day looms in the fog, April 17!

Russ Fox reminds us that Corporate Tax Deadline is Monday, March 16th and Form 1042 Filing Deadline is Monday, March 16th. Form 1042 reports most foreign withholding, except for partner withholding.


Jack Townsend, Judge Posner Confronts a Crackpot in a Tax Crimes Case. “The point is, Judge Posner entertains.”

Jim Maule, Moving? Let the IRS Know. “The lesson is undeniable. Taxpayers who move need to send a change of address notice to the IRS.”

Peter Lowy covers the same case as Prof. Maule in Gyorgy v Comm’r Tees Up Important Procedural issues at Procedurally Taxing.


Via Wikipedia

Via Wikipedia

Robert Wood, Fake IRS Agent Scam Targets Public, Even Feds, While Identity Theft Tax Fraud Is Rampant. “Senate testimony shows just how serious fraudsters are at tax time, and just how easy it is for them to get your tax refund.”

Tom Giovanetti,, Blame the IRS and Congress, not software, for tax fraud (The Hill)

Responsibility falls squarely at the feet of the IRS to enforce existing law but ultimately to Congress, as it’s within Congress’s power to reform and simplify programs and restructure administrator incentives to identify and prosecute fraud.

That’s why it’s shameful to see Congress pass the buck and attempt to pin the blame for tax fraud on . . . tax preparation software. That’s right—according to some in Congress, apparently TurboTax is to blame.

Blaming TurboTax for the way the IRS sends billions to thieves every year is like blaming GM for a bank robbery when a Chevy was used as the getaway car.


Peter Reilly, Jury Finds Kent Hovind Guilty Of Contempt Of Court No Verdict On Fraud Charges. More on the sago of the founder of the young earth creationist theme park.


20130316-1Kyle Pomerleau, Irish Business Leader Calls for Income Tax Reform:

It may be surprising to Americans to hear that Ireland has pretty high taxes. We usually hear about Ireland’s tax system in the context of its corporate income tax rate, which sits a low 12.5 percent, half the average rate of the OECD. We are led to believe that Ireland is a low-tax country in general.

In reality, Ireland’s tax code has some of the highest marginal tax rates, especially on income, in the OECD.

I did not know that.


Robert Goulder, Reading Between the Lines (Tax Analysts Blog). “Reading between the lines, we can surmise that conservatives in Congress are now trying to decide which is worse: Camp’s revenue raisers or a federal consumption tax.”

Kay Bell, Old online sales tax bill resurrected in new Senate

TaxProf, The IRS Scandal, Day 673. My high school classmate got pushed around by Lois Lerner in her FEC days, and Politico can’t be bothered to care.

Carl Davis, Nine States and Counting Have Raised the Gas Tax Since 2013 (Tax Justice Blog)

G. William Hoagland, Dynamic Scoring Forum: Overblown Concerns? (TaxVox)




Tony Nitti, House Bill Would Provide Tax Deduction For Gym Membership; Shake Weight. I wonder how long it would take to start qualifying gyms specializing in 12-ounce curls to tap into this?

Alberto Mingardi, Greece and tax sadist tourism (EconLog):

The Greek government apparently announced that it wants to hire part timers as “undercover agents to grab out tax evaders”. Tourists, students and housewives could work armed with wireless devices to catch shopkeepers and service providers who do not issue receipts when they sell goods and services.

The application of the concept to tourists potentially opens up a new whole kind of business: sadistic tourism. Syriza regularly portrays Germans as evil people that want to make the poor Greek suffer: why not turning that into a profitable line of activity for the government? Come to Greece. Ouzo, great sea, beautiful landscapes, moussaka, and you’ll have the pleasure to force dirty little shopkeepers to pay their dues to the government!

If the Treasury Employees Union has a travel office, this could be a popular offering.



Tax Roundup, 3/6/15: Crime Watch Edition. Rashia, still 21.

Friday, March 6th, 2015 by Joe Kristan

It’s the time of the year when exasperated taxpayers and preparers are tempted to say, “bugger all this, I’m going to go for the gusto and cheat on my taxes!” That’s when it’s useful to look in on an old friend of the Tax Update to see how well that’s going.

Rashia says "thanks, Commissioner!"

Rashia says “thanks, Commissioner!”

Let’s look in on Rashia Wilson, who proclaimed herself (on Facebook!) the “Queen of IRS Tax Fraud.” Her reign was cut short by federal identity theft tax refund charges, resulting in a 21-year sentence. And with federal sentences, you have to serve at least 90% of the time.

Ms. Wilson naturally was unhappy with this judicial lèse-majesté, so she appealed, citing procedural irregularities. The trial judge was ordered to reconsider. On further review, the call on the field stands. 21 years.  Robert Wood has more.

Iowa has tax ID fraud too. While South Florida may be the kingdom of tax refund fraud, it has colonies everywhere. Even in Iowa: Cedar Rapids woman charged with filing false tax returns (

The United States Department of Justice says 33-year-old Gwendolyn Murray is charged with twelve counts of filing false claims for tax refunds, seven counts of theft of government property, and two counts of aggravated identity theft.­ The indictment containing the charges was unsealed on Tuesday.

It is alleged that Murray filed 12 fraudulent tax returns in 2012 and 2013 using other people’s names. She received refunds on seven of those tax returns. The court also alleges that Murray stole the identities of two people.

It’s good to prosecute ID thieves, but it’s far better to keep them from thieving. It’s eye-opening that 7 of the 12 alleged attempts allegedly succeeded. Criminals aren’t known for their impulse control or their ability to anticipate long-term consequences. If they see somebody get a bunch of cash just from keying in some numbers on a computer, they’re going to want some of that bling themselves, and they aren’t going to ponder the likelihood of a prison sentence first.  The IRS is pretty much leaving the door unlocked and the cash register open.


Megan McArdle says the culture of “getting a big refund” is part of the problem in Fewer Tax Refunds, Fewer Scams:

If all returns were submitted at the same time, and refunds were held until they could be cross-checked against the IRS’s copies of W-2s and 1099s, then this sort of fraud wouldn’t work very well; the IRS would know it had two returns and could start the process of figuring out which one was fraudulent before it mailed the check. But we love our early refunds, and people often count on getting that check as early as possible.

She offers wise advice:

However, there’s one thing you personally can do to fight tax fraud, and that’s make sure that you don’t give the government more money than you have to. You should never get excited about a tax refund; all it means is that you gave the government a substantial interest-free loan by withholding too much tax throughout the year. You should aim for your refund to be as small as possible — ideally, zero.

A system that sends $21 billion annually to fraudsters — and that number is rising rapidly — can’t continue forever. Part of this will be a technological fix.  My wife can’t buy a dress at Nordstrom in Chicago without triggering phone calls from two credit card companies.  Meanwhile, the IRS happily wires wads of cash to Rashia. One would hope the IRS could learn something from Visa and Discover.

But the IRS is bad at technology, so part of the fix will have to be slower (and ideally, smaller) refunds. This could include lower penalty thresholds for underpayments so that taxpayers will be more willing to risk owing a bit on April 15 — perhaps combined with withholding tables that leave taxpayers owing a bit, rather than getting refunds.


What else can you do to protect yourself? 

  • Be careful with your tax information. Never divulge your bank account or credit card info to strangers over the phone.
  • Assume any unexpected call from a tax agency is a scam.
  • Don’t send copies of 1099s and W-2s as e-mail attachments to your preparer, and don’t email a pdf of your 1040 to a loan officer. That leaves your information exposed.
  • When you transmit confidential information, use strong encryption, or better yet upload it via a secure file transfer site, like the FileDrop system we use at Roth & Company.



20150105-2Peter Reilly, IRS Grossly Unqualified To Make Determinations About Software Related Exempt Applications. The IRS is grossly unqualified for any number of things that Congress gives it to do. Just a very few that come immediately to mind:

– Determining what is “qualified research” for the research credit.

– Determining the energy properties of “green fuels” for the biofuel subsidies.

– Running the nation’s healthcare insurance finance system.

– Policing political speech by tax-exempt organizations.

An outfit that can’t keep two-bit grifters from cashing in billions in tax refunds annually shouldn’t be looking for new things to do.


Kay Bell, Tax identity thief mistakenly sends fake refund to real filer. The police don’t spend their days chasing geniuses.

Jack Townsend, More on Light Sentencing for Offshore Account Tax Crimes.


Russ Fox provides a valuable service with Online Gambling Addresses Updated for 2015. Taxpayers with offshore online gambling accounts are required to report them on the “FBAR” report of foreign financial accounts (Form 114). The FBAR requires a street address for the account, and these can be hard to find for gambling websites.

William Perez offers advice on how to Communicate Effectively with Your Tax Preparer. We aren’t always the best company this time of year. Come prepared, be efficient, and you can leave our office before we do something bizarre. Other than what we do for a living, of course.

Jason Dinesen, Marriage in the Tax Code, Part 3: Big Changes in 1917

Jim Maule, The IRS and the Taxpayer: Both Wrong. “The taxpayer argued that because the distribution from the IRA was less than the his investment in the IRA, it should be treated as a return of investment. The IRS argued that the entire distribution should be included in the taxpayer’s gross income. The Tax Court concluded that both the taxpayer and the IRS were wrong.”




Kyle Pomerleau, The Rubio-Lee Plan Would be Good for Everyone, Especially Low Income Earners (Tax Policy Blog):

If you take all the pieces of the Rubio-Lee tax plan together, it actually produces the largest increase in after-tax income for the lowest income earners, not the highest.

According to our analysis, the bottom decile of taxpayers will see an increase in after-tax income of 44.2 percent, a percentage increase in income nearly four times larger than the top 1 percent’s increase in after-tax income. But the plan doesn’t just increase the after-tax income of the top and the bottom. All taxpayers will see higher after-tax incomes due to this plan.

The Rubio-Lee plan, with its elimination of the double corporate tax and its business rate reductions, is the most promising tax reform plan to surface in a long time. But its opponents can never see wisdom in anything that benefits “the rich,” even when it benefits everyone else.


Renu Zaretsky, Expensive Plans, ACA Developments, and Exercises in Futility. Today’s TaxVox roundup has links to folks hating on Rubio-Lee, Spanish film tax credits, and more.

Patrick Smith, Supreme Court’s Direct Marketing Case May Have Great Significance in Anti-Injunction Act Cases (Procedurally Taxing)



Spring will come!



Cara Griffith, The Use of Big Data in Auditing (Tax Analysts Blog). “For state auditors, big data (like other types of data) could be used to better evaluate and select taxpayers for audit.”

TaxProf, The IRS Scandal, 666


Why would he want a job with less power? Former IRS Commissioner Mark Everson To Run For President. Yes, Of The United States (Tony Nitti)

Culture Corner. A Tax Shelter Board Game Is a Thing That Exists (Caleb Newquist, Going Concern).




Tax Roundup, 2/26/15: Fifth circuit bails out abandonment. And: gas up before Sunday, Iowa!

Thursday, February 26th, 2015 by Joe Kristan

Fill ’em up Saturday. Iowa’s Governor Branstad signed a 10-cent per gallon gas tax boost into law yesterday. It takes effect Sunday.

Somewhat related: Replacing the Gas Tax with a Mileage-Based Tax (Kyle Pomerleau, Tax Policy Blog).


20131212-1Taxpayer wins $20 million bet. Pilgrim’s Pride Corporation had an offer to sell securities for $20 million. It had a $98.6 million cost in the securities, so it wasn’t a great return, but $20 million is still better than nothing. Well, maybe not.

The taxpayer determined to abandon the securities in the belief that the result would be a $98.6 million ordinary loss — generating a tax savings of around $34.5 million. That seemed like a better deal than taking the cash, because the $78.6 million loss would then be a corporate capital loss — deductible only against capital gains, and expiring after five years.

In December 2012 the Tax Court said that Pilgrims Pride made a losing bet, ruling that Section 1234A made the loss a capital loss. Now the Fifth Circuit Court of Appeals has ruled that the taxpayer made the right bet, reversing the Tax Court:

The primary question in this case is whether § 1234A(1) applies to a taxpayer’s abandonment of a capital asset. The answer is no. By its plain terms, § 1234A(1) applies to the termination of rights or obligations with respect to capital assets (e.g. derivative or contractual rights to buy or sell capital assets). It does not apply to the termination of ownership of the capital asset itself. Applied to the facts of this case, Pilgrim’s Pride abandoned the Securities, not a “right or obligation . . . with respect to” the Securities.

Taxpayers outside the Fifth Circuit still need to be aware that the Tax Court says abandonment doesn’t turn capital losses into ordinary income, but in the right circumstances, it may still be worth a try. In the Fifth Circuit, abandon with, well, abandon.

I find this from the Fifth Circuit opinion interesting, if not necessarily true:

Congress does not legislate in logic puzzles, and we do not “tag Congress with an extravagant preference for the opaque when the use of a clear adjective or noun would have worked nicely.”

Logic puzzles seem to be pretty common in the tax law. Look at the ACA, which provides a $100 per-day, per-employee penalty for Section 105 plans, while Section 105 itself still rewards employees who participate in these plans with a tax benefit. That puzzles me. But I digress.

When the Tax Court first ruled in this case, I wrote:

Presumably the Gold Kist [a company that ended up owning Pilgrim’s Pride] board didn’t decide to go for the ordinary loss on its own.  Somewhere along the way a tax advisor told them that this would work.  That person can’t be very happy today for advising the client to walk away from $20 million in cash.

That’s one tax advisor who had an excellent day yesterday.

Cite: Pilgrim’s Pride Corporation, CA-5, No. 14-60295

Other coverage: Fifth Circuit Reverses Tax Court, Allows $98 Million Deduction To Pilgrim’s Pride (Tony Nitti)




Jason Dinesen ponders What to Do with a K-1 with a Fiscal Year End

Russ Fox, Taxes Impacting the Giants. “There’s an obvious implication here: the big spending Los Angeles Dodgers and New York Yankees have inflated their salaries to cover high state taxes.”

TaxGrrrl, Looking For Your Refund? Need To Ask A Question? Finding Answers At IRS.

Peter Reilly, IRS Denies 501(c)(3) Exemption To Booster Club Due To Inurement. Quoting the IRS denial letter:

However, the money that they make in your name does not go into your general budget. Rather, you keep an accounting of how much revenue each member brings in and permit each member to apply that revenue to the cost of athletic competitions for their children.

Peter explains why that doesn’t work.


Kay Bell, More forgiving IRS to waive some bad 1095-A tax penalties


TaxProf, The IRS Scandal, Day 658. Today’s big story is the $129,000 on bonuses paid to Lois Lerner while Tea Party applications for exemption languished. I’m sure there’s no connection.

Alan Cole, Putting the Puzzle Pieces Together on Corporate Integration (Tax Policy Blog):

The reason that the traditional American C corporation is in decline is that it has faces multi-part tax, with two successive rounds of taxation for the owners. In contrast, the pass-through structure faces only one. That is why American businesses, when possible, are choosing this tax structure. It is now the dominant legal structure for businesses in America. In that structure, the owners of the corporation simply pay ordinary income tax on all the corporation’s income.

The path ahead to fundamental tax reform almost necessarily must lead through corporate integration. Fortunately, my colleague Kyle Pomerleau has done the research that ties this all together. He has found out how some other countries – like Australia and Estonia – have gone about tying together their corporate taxes and their shareholder taxes into one neat single layer.

So simple it just might work!


Matt Gardner asks whether Goldman Sachs is Too Big to Pay Its Fair Share of Taxes? (Tax Justice Blog).


Cara Griffith, The Pinnacle of Secret Law (Tax Analysts Blog). ” That the Colorado Court of Appeals would seek to shield from public view most of the opinions it issues is appalling.”

Richard Auxier, GOP Governors Flirt with Tax Hikes but Still Wedded to Income Tax Cuts (TaxVox). Governor Branstad went boldly beyond flirting yesterday. Does signing the gas tax boost make Governor Branstad an unfaithful husband?


Caleb Newquist, Supreme Court Unhooks Fisherman From Conviction Under SOX Anti-Shredding Provision (Going Concern). “Please practice catch and release.”



Tax Roundup, 2/10/15: Iowa House may vote on conformity today. And: pass-through isn’t the same as “small.”

Tuesday, February 10th, 2015 by Joe Kristan

IMG_1284Iowa Conformity Update: No action yesterday in the Iowa House on SF 126, the Senate-passed bill that conforms Iowa income to federal rules, except for bonus depreciation. The house version of the bill, HF 125, is scheduled for debate today in the Iowa House. That means we may have a vote today.

Update, 9:15 a.m. SF 126 passes Iowa House, 94-0. The Senate-passed bill was substituted for HF 125 on the floor and approved. It now goes to the Governor, who is expected to sign.


Kyle Pomerleau, Some Pass-Through Businesses are Significant Employers (Tax Policy Blog):

In the United States, most businesses are not C corporations. 95 percent of businesses are what are called pass-through businesses. These businesses are called pass-throughs because their income is passed directly to their owners, who then need to pay individual income taxes on it. Contrast this with C corporations that need to pay the corporate income tax on its income before it passes its earnings to its owners. Combined, pass-through businesses employ 55 percent of all private-sector workers and pay nearly 40 percent of all private-sector payroll.

When business income is taxed on the 1040 and income tax rates are raised, the business has less income to hire and grow.



Not recognizing the fact that pass-through businesses can be large employers can bring about poor policy choices. For example, increases in the top marginal individual income tax rate will not only hit individuals with high wage income or business income, it may hit a significant number of large employers who are organized as pass-through businesses. Conversely, some policies that are aimed at helping small businesses, such as state-level pass-through business income tax exemptions, could incidentally benefit large established businesses.

Unfortunately, no individual rate is ever high enough for some people.


younker elevatorsHoward GleckmanTax Subsidies May Not Help Start-Ups as Much as Lawmakers Think (TaxVox):

But the biggest reason startups may be unable to take advantage of tax subsidies is that they often lose money in their early years. In theory, generous preferences such as Sec. 179, the research and experimentation credit, or even the ability to deduct interest costs are all available to startups. In reality, many cannot use them because they make no profit and, thus, pay no tax.

Firms can carry net operating losses forward for up to 20 years but these NOLs are far less valuable than immediate deductions for three reasons—money loses value over time, some firms never generate enough income to take full advantage of their unused losses, and some lose their NOLs when they are acquired. A 2006 Treasury study found that at least one-quarter of these losses are never used and others lose substantial value.

One way to help this problem would be to increase the loss carryback period. Businesses can only carry net operating losses two years. Corporations in Iowa and some other states can’t carry them back at all.

Consider a business that has income in year one, breaks even in years 2 and 3, and loses enough to go broke in year four. It never gets the year 1 taxes back, even though over its life it lost money.

An increased loss carryback period would be especially useful to pass-through owners, enabling some of them to get tax refunds to keep their businesses alive. But once the government has your money, they hate to give it back.

Loosening the “Sec. 382” restrictions on loss trafficking would also help. A struggling business would be more likely to get investment funds if the investor could at least count on using some otherwise wasted tax losses. But the government is more interested in protecting its revenue than in helping struggling businesses.


Department of Foreseeable Unintended ConsequencesTax Analysts Jennifer DePaul reports ($link):

 While a joint session of the New York State Legislature on February 9 heard Democratic Gov. Andrew Cuomo’s $142 billion budget proposal, the governor released more details about several tax measures included in his budget plan.

Among them was a proposal designed to crack down on tax scofflaws by suspending the driver’s licenses of debtors who owe the state as little as $5,000.

This means taxpayers with relatively small balances due will be deprived of their legal transportation to get to work. This means some taxpayers will have to quit their jobs and never get caught up with their debt, leading to a financial death spiral. Others will try to get to work, get locked up for driving on a suspended license, lose their jobs because they didn’t show up, and go into a financial death spiral. It’s a recipe for locking more people into the underclass because their Governor wants their money faster.

Related: Brian Doherty, Drivers License Suspensions Slamming the Working Poor for No Particular Good Reason in Florida  (; Megan McArdle, Cities Dig for Profit by Penalizing the Poor




Russ Fox, Harassing IRS Agents Isn’t a Bright Idea. “Speaking of ways to get in trouble with the IRS, one is to harass an IRS agent. They don’t like it (and it’s a crime).”

Tony Nitti, Are You Exempt From The Obamacare Insurance Penalty?

Robert Wood has 7 Reasons Not To File Your Taxes Early, Even If You’ll Get A Refund. “Measure twice, cut once.”

Paul Neiffer, How Do Repair Regulations Affect My Farm Operation? It does. Find out more when Paul helps present a webinar on the topic for the ISU Center for Agricultural Law and Taxation February 18.

William Perez, How Dividends Are Taxed and Reported on Tax Returns


Peter Reilly, Tax Court Hammers IRS CI Who Went Out Into The Cold. The strange, sad saga of Joe Banister.

Leslie Book, Some More Updates on IRS Annual Filing Season Program and Refundable Credit Errors. Leslie thinks that preparer regulation would help. I believe the persistent high rate of incorrect EITC payments in spite of increasing IRS initiatives to bug preparers and force them to document due diligence for EITC clients shows that preparer regulation won’t solve this problem.

Jason Dinesen, Send a 1099-C to a Non-Paying Customer? Updated. Probably unwise.



Jeremy Scott, Finance Committee Review of 1986 Act Smacks of Desperation (Tax Analysts Blog):

The Senate Finance Committee will try to use history as a guide to break the logjam on tax reform. The Republican-led body will hold a February 10 hearing featuring former Finance Chair Bob Packwood and former Sen. Bill Bradley, who will talk about the process that led to the historic legislation that redefined the tax code and has left its imprint on the minds of would-be tax reformers for almost three decades now. However, looking back at 1986 appears more desperate than inspired because most of the factors that existed then are almost totally absent now.

I think all this Congress can accomplish is to not make things work, and to lay the groundwork for a tax reform that might be enacted in a more congenial political climate.


TaxProf, The IRS Scandal, Day 642.


Career Corner. Let’s Discuss: Wearing Headphones at the Office (Jesstercpa, Going Concern). You can tell you are moving up in the CPA world if you get an office with a door, and you can use actual speakers. Unless you are in one of those hideous “open offices,” of course.



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




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).


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.