Posts Tagged ‘Leslie Book’

Tax Roundup, 3/22/16: Iowa couples to 2015 federal Sec. 179 and other changes, except bonus depreciation.

Tuesday, March 22nd, 2016 by Joe Kristan

CouplingcrescoSee you next year. 81 days after 2015 ended, Iowa finally has its 2015 tax law. Governor Branstad yesterday signed HF 2433, adopting federal tax law changes for 2015, including the $500,000 Section 179 limit, but not including bonus depreciation.

While Congress enacted the $500,000 limit permanently last year — and indexed it for inflation — Iowa’s coupling is for one year only. That sets up a fight in the 2017 General Assembly not only over bonus depreciation, but over all of the other “expiring provisions” that Congress re-enacted in December.

How we got here. While Iowa’s income tax is based on federal income tax rules, it doesn’t automatically adopt federal tax law changes. Every spring the General Assembly passes a “coupling” bill where they choose whether to adopt federal tax changes made in the prior year. The Congressional habit of enacting important tax provisions for one or two-year periods — to pretend they cost less — has made the annual coupling bill an important part of the legislature’s work.

Since 2010, Iowa has adopted all federal tax law changes except for bonus depreciation. These have included the $500,000 Section 179 deduction for new asset purchases that would otherwise have to be capitalized and depreciated over a period of years — usually three to seven years. In recent years the coupling bill has been one of the first bills to go to the Governor.

This year is different. Governor Branstad surprised the Iowa tax world when he announced on January 13 that there would be no coupling for Section 179 for 2015, on the grounds that the state budget required the revenue. It soon came out that he opposed coupling for anything but the federal research credit. That would have made a major mess out of Iowa tax filing season, affecting a broad range of deductions, including:

Exclusion for IRA distributions to charity
Exclusion of gain from qualified small business stock
Basis adjustment for S corporation charitable contributions
Built-in gain tax five-year recognition period
$250 above-the-line educator expense deduction
Exclusion of home mortgage debt forgiveness
Qualified tuition deduction
Optional sales tax deduction
Conservation easement deductions
Deduction for food inventory contributions

His Republican partisans in the Iowa House of Representatives rebelled. A coupling bill that included Section 179 passed the Iowa house by month-end, 82-14. Notably, not only did all voting Republicans support the bill, but so did a large majority of Democratic representatives.

Yet the prospects for coupling at the time looked grim. Citing the Governor’s opposition, Senate Majority Leader Gronstal (D-Council Bluffs) was set to keep the House-passed bill from ever coming to a Senate vote.

coupling20160213But the natives were restless. The legislators heard from a lot of their constituents that they were unhappy to lose the deduction, which could be worth around $40,000 for many taxpayers. The Des Moines Register reported that “only” 25,000 taxpayers would have lost deductions under that, but that comes out to 250 grumpy business constituents and farmers for every Representative, and 500 per senator. It seems most of them got on the phone and called their legislator. Business groups such as the Iowa Association of Business and Industry pushed for coupling, as did Iowans for Tax Relief.

The message got through. By February 22, Governor Branstad reversed himself and decided Iowa could afford Section 179 coupling for one more year. That left Senator Gronstal as the remaining roadblock to coupling. He extracted a face-saving reduction in the sales tax exemption for manufacturing supplies that the Department of Revenue put into place last year — by accepting a version of the break that he blocked in 2014.

Now it’s time to catch up. The software vendors will scramble to update their tax prep programs to include the coupling, and we can finally start to move all of the Iowa tax returns that have been on hold awaiting the coupling.

Unfortunately, this coupling bill is only for one year — even though $500,000 Section 179 is now a permanent federal tax provision. We can expect both the Governor and Senator Gronstal to oppose Section 179 coupling in the next General Assembly. They have other priorities.

Other coverage:

Gazette.com, Branstad signs tax-policy compromise

Des Moines Register, Branstad signs tax policy compromise

Maria Koklanaris, Iowa Governor Signs Exemption, Federal Conformity Bill

Paul Neiffer, Iowa Governor Branstad Finally Signs Coupling Bill.

 

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Kay Bell, Figuring the tax value of goods you give to charity

TaxGrrrl, The 9 Most Common Tax Filing Mistakes – And How To Avoid Them. “Rushing tends to result in mistakes – and those errors can slow processing of your tax return, resulting in delayed tax refunds or worse, a second glance from Internal Revenue Service (IRS).”

Jason Dinesen, Success Comes Too Easily for a Side Business. “In my experience, most of us who try taking a side business full time end up overwhelmed. A few of us make it through.”

Peter Reilly, AICPA Versus Block Advisors In Spat I Hope They Both Lose. “The reason that the H&R Block ‘Who actually prepares your return?’ question is the money shot is that at many national and large CPA regional firms, the answer will be ‘Somebody in India‘”  All Roth & Company returns are 100% U.S. content, by the way.

Leslie Book, Clarke Case Finally Comes to End: Eleventh Circuit Orders Enforcement But Also Leaves Door Open For Allegations of Improper Purpose (Procedurally Taxing).

Jack Townsend, Ruminations on Inconsistent Verdicts. “The issue of inconsistent verdicts is a big issue.”

 

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Joseph Henchman, U.S. Supreme Court Declines to Hear Case Challenging Colorado Marijuana Law (Tax Policy Blog). “The U.S. Supreme Court today turned down an attempt by Nebraska and Oklahoma to challenge Colorado’s legalization of marijuana, without explanation.”

Renu Zaretsky, Are Presidential Candidates’ Tax Plans Getting Closer Looks? Today’s TaxVox headline roundup covers the millionaires who want to pull up the ladder behind themselves in New York, polling on the Bernie plan, and more.

TaxProf, The IRS Scandal, Day 1048

Jeremy Scott, Scotland Makes the Case That Taxes Pay for Things People Want (Tax Analysts Blog) “The Conservatives were quick to point out that she was essentially putting a ‘higher taxes here’ sign on the border that would encourage migration and tax planning.”

Ajay Gupta, Trump Only Threatens a Trade War, But Obama Might Actually Start a Tax War (Tax Analysts Blog)

 

News from the Profession. This 8-K From Valeant Is Something to Behold (Caleb Newquist, Going Concern).

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Tax Roundup, 3/21/16: Governor to sign… Dixie Cornell Gebhardt Week Proclamation! (Update– coupling signed!)

Monday, March 21st, 2016 by Joe Kristan

couplingNo sign yet. The Governor is back from his spring break, but nothing on the legislature’s web site indicates that he has signed HF 2433, the extender bill coupling Iowa to most 2015 federal tax law changes, including the Section 179 deduction. Meanwhile, it’s March 21 and we don’t know Iowa’s 2015 tax law yet. There’s nothing about signing the bill on the Governor’s calendar or press release site.

The Governor is scheduled to sign the “Dixie Cornell Gebhardt Week proclamation” this afternoon.  Per Wikipedia, Dixie Cornell Gebhardt “was a leader of the Daughters of the American Revolution in Iowa during World War I, and was responsible for the design of the Iowa’s state flag.”

Maybe we’ll learn more at his 9:00 am press conference today.

 

Update, 6:15 pm. The bill has been signed. From the press release:

“I’m pleased that the Legislature was able to come together and reach a consensus on this bill.  I support coupling for one year and placing into Iowa Code an exemption for supplies consumed in manufacturing from the sales tax that will help Iowa taxpayers and businesses,” said Branstad.  “Although I am disappointed that the exemption does not go as far as the administrative rules that were passed through the Administrative Rules Review Committee earlier this year that dealt with advanced manufacturing, I’m proud to sign the bill that moves Iowa forward on both of these key issues.”

This completes the Governor’s reversal on the coupling issue. When the session started, the Governor’s budget provided for no coupling for Section 179 for 2015 — and no coupling for any of the other provisions extended by Congress in 2015, other than the research credit.

We can expect the Governor to oppose coupling for Sec. 179 next year. He has other priorities.

 

Update, 9:26 a.m. Kathie Obradovich tweets from the Governor’s Press Conference:

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Sooner is better Governor. It’s March 21, and the software companies all have to do an update after you sign.

 

Biology. The Senate last week passed yet another special interest tax credit, the “Renewable Chemical Production Tax Credit” (SF 2300). It flew through the Senate 46-3, and it is expected to pass the House easily.

One of the three “no” votes was from Ames Democrat Herman Quirmbach. He explained to the Ames Tribune:

“The new program narrowly targets a single industry. You hear often, especially from the Republican side, that we shouldn’t try to pick winners and losers, while this is trying to pick a winner and a loser,” Quirmbach said.

According to Quirmbach, there are only two possible outcomes if this bill is allowed to move forward.

“No. 1, the industry is going to be a success, maybe the boosters are right about how much income and wealth are going to be generated. In that case, why do they need a government handout? Or it’s going to be a failure. In that case, why do we want to flush taxpayer money down the drain,” Quirmbach said. “Either way, this is something the government shouldn’t be involved in. Markets are good at this, government is generally pretty bad this.”

This is exactly right. It’s worth noting that Sen. Quirmbach was one of only two senators to vote against the disastrous Iowa film tax credit program. I also note that all Republicans voted in favor of the vote, showing again the weakness of the Iowa GOP’s free-market inclinatations.

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Kristine Tidgren, Iowa Court Denies Adverse Possession Claim (Ag Docket). “Ambiguous wills often lead to unfortunate family disputes.”

Kay Bell, IRS 2016 refunds around same amount, at same pace. “Tax refunds in many states, however, are markedly slow in arriving.”

Jack Townsend, Eighth Circuit Affirms Adult Entertainer’s Conviction for Tax Perjury and Sentencing for Unreported Income for Sexual Services. More on the unfortunate Okobojian whose case we discussed Friday.

Leslie Book, Riley Out of Luck on Theft Loss Deductions (Procedurally Taxing). “The opinion also walks through the reasons why Riley was not entitled to either a nonbusiness bad loss deduction or a deduction for worthless securities.”

TaxGrrrl, Taxes From A To Z (2016): F Is For Filing Status

Robert Wood, Hulk Hogan Wins $115 Million Sex Tape Verdict Against Gawker, IRS Wins Too

 

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TaxProf, The IRS Scandal, Day 1045Day 1046Day 1047. Day 1046 features Robert Wood on the administration response: “Deny, stonewall, deny.”

Renu Zaretsky, Tax Reform Inch by Inch, Hearing by Hearing. Today’s TaxVox headline roundup covers upcoming tax reform hearings, Bernie Sanders complaining about a merger, and a tax-caused strike in india.

 

News from the Profession. H&R Block CEO Not Impressed With AICPA’s Letter, Vows More Ads (Caleb Newquist, Going Concern). I hope the new ads explain how they hire Washington insiders to suppress their smaller competitors.

 

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Tax Roundup, 3/3/16: IRS sets up ID theft victims for another round. And: if you don’t have kids, there’s Craigslist!

Thursday, March 3rd, 2016 by Joe Kristan
This convicted ID thief likely was a first-day filer.

The kind of criminal mastermind ID thief that continually outwits the IRS.

There is no bottom. Every time I think that the John Koskinen’s IRS couldn’t possibly be less competent, they prove me wrong. Identity Thieves Bypass IRS Protections for Previous Victims (Tom VanAntwerp, Tax Policy Blog):

The IRS provides an Identity Protection PIN (IP PIN) to victims of identity theft with the goal of preventing it going forward. This IP PIN is mailed to individuals at the start of tax season, and is required to file a return. But the IRS also allows taxpayers to retrieve their IP PIN online by answering the same kinds of knowledge-based authentication questions that let thieves take advantage of the older Get Transcript website.

Computer crime reporter Brian Krebs published this account of Becky Wittrock, a previous identity theft victim whose IP PIN was compromised:

“I tried to e-file this weekend and the return was rejected,” Wittrock said. “I received the PIN since I had IRS fraud on my 2014 return. I called the IRS this morning and they stated that the fraudulent use of IP PINs is a big problem for them this year.”

Wittrock said that to verify herself to the IRS representative, she had to regurgitate a litany of static data points about herself, such as her name, address, Social Security number, birthday, how she filed the previous year (married/single/etc), whether she claimed any dependents and if so how many.

“The guy said, ‘Yes, I do see a return was filed under your name on Feb. 2, and that there was the correct IP PIN supplied’,” Wittrock recalled. “I asked him how can that be, and he said, ‘You’re not the first, we’ve had many cases of that this year.’”

Wittrock noted that the IRS representative said that they would be moving away from using the IP PIN in the near future and replacing it with a different system. No details are known about how this new system might function or if it will avoid the insecure knowledge-based approach to authentication.

Through lax IRS controls, the IRS lets a thief file a return in your name. You go through a long, exasperating process to straighten things out. Meanwhile, the IRS sits on your refund, even though it promptly wired cash to the thief. Then they give you an IP-PIN and assurance that it won’t happen again. And it happens again.

I never thought Doug Shulman would lose his crown as Worst Commissioner Ever. I wish I were right about that. And they think they should regulate preparers because we’re incompetent and out-of-control.

More coverage:

TaxProf, The IRS Is Using A System That Was Hacked To Protect Victims Of A Hack—And It Was Just Hacked

Taxable Talk, The Most Terrifying Words in the English Language Strike Again

 

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TaxGrrrl, On Dr. Seuss’ Birthday, Oh, The Taxes You’ll Pay!:

More taxes!
Whether you like it or not,
Taxes will be something
you’ll pay quite a lot.

Oh, but the IRS will take such good care of it, you’ll not mind, not one little bit!

 

Peter Reilly, Tax Losses From Genetically Engineered Deer Allowed. “The purpose of the selective breeding is to get deer with really impressive head gear.”

Kay Bell, Doing the weird and wacky tax deduction dance. Yes, deer.

Leslie Book, Follow up On Clean Hands Post: The Imposition of Penalties and How Using a Preparer Does Not Automatically Constitute Good Faith and Reasonable Cause (Procedurally Taxing). “At the end of the day, the opinion is certainly a warning that merely hiring a preparer is not enough, and proving reliance on an advisor requires perhaps a bit more focus than a taxpayer’s testimony that the accountant prepared the return.”

 

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Scott Drenkard, Philadelphia Mayor Proposes Gigantic Soda Tax (Tax Policy Blog). It’s the tax that’s gigantic, not the pop serving.

Donald Marron, Budgeting for federal lending programs is still a mess (TaxVox). A good reason to not have federal lending programs.

TaxProf, The IRS Scandal, Day 1029

News from the Profession. Accounting as Performance Art? Sure, Why Not? (Caleb Newquist, Going Concern)

 

You can get anything on Craigslist! Even dependents, it seems. From a Department of Justice press release:

Tammy Dickinson, United States Attorney for the Western District of Missouri, announced today that an Ozark, Mo., man has been indicted by a federal grand jury for filing false income tax returns after he advertised on Craigslist to purchase identity information for children that he could claim as dependents.

Raheem L. McClain, 37, of Ozark, was charged in a three-count indictment returned under seal by a federal grand jury in Springfield, Mo., on Feb. 23, 2016. That indictment was unsealed and made public upon McClain’s arrest and initial court appearance on Tuesday, March 1, 2016.

The federal indictment alleges that McClain caused an advertisement to be posted on Craigslist on Jan. 16, 2015, stating:

“WANTED: KIDS TO CLAIM ON INCOME TAXES – $750 (SPRINGFIELD,MO)

IF YOU HAVE SOME KIDS YOU ARENT CLAIMING, I WILL PAY YOU A $750 EACH TO CLAIM THEM ON MY INCOME TAX. IF INTERESTED,REPLY TO THIS AD.”

In a way, it makes economic sense. It would let people whose incomes are too high monetize otherwise useless dependents. But as you might have gathered from the word “indictment,” the tax law frowns on this sort of thing.

 

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Tax Roundup, 2/1/2016: Caucus day, and other plagues.

Monday, February 1st, 2016 by Joe Kristan

20160131-1Is there such a thing as snow locusts? Today is the last day Iowa will be plagued by presidential candidates and their relentless ads and emails. Tonight, blizzard and winter storm warnings across the state.

Lots of things go into choosing a candidate. We kid ourselves if we think it is all rational. Many voters put as much thought into their political preferences as they do into choosing a favorite sports team. Most voters are much more informed about their sports teams than their votes.

But Tax Update readers are different!  You especially want to know about candidate tax policies. Fortunately, the Tax Foundation has an excellent Comparison of Presidential Tax Plans and Their Economic Effects. I like this chart they provide:

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You’ll notice that only one plan is projected to have positive economic effects while reducing the budget deficit over 10 years. I like that one.

 

Other Caucus-related links:

Tax Policy Center Major candidate tax proposals, a center-left analysis.

TaxProf, Clinton (47%), Sanders (54%) Propose Highest Capital Gain Tax Rates (Now 24%) In History

Tyler Cowen, My favorite things Iowa (Marginal Revolution). “The bottom line: Who would have thought ‘jazz musician’ would be the strongest category here?” Speak for yourself, buddy!

 

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Russ Fox, The Liberty to Commit Tax Fraud:

This story does show two things. First, requiring every tax professional to obtain a license won’t stop tax fraud. The alleged fraud here was started by an individual with a PTIN, someone who assuredly could obtain the former RTRP designation or the current AFSP “seal of approval.” Second, the Department of Justice news release notes, “In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers.” This is absolutely true, and the DOJ should be commended for their work. It also shows that licensing every tax professional isn’t needed to get rid of unscrupulous ones.

Amen.

William Perez, When Does an 83(b) Election Make Sense? 

Paul Neiffer, Pre-1977 Purchases May Get 100% Step-up or Not! Involving old joint interests in property.

Kay Bell, W-2, 1099 forms delivery deadline is here

Jack Townsend, 60 Minutes Exposé on Money Laundering Into the U.S.

Jason Dinesen, Not All Donations to Charity Are Deductible. Time, for example.

Kristine Tidgren, Des Moines Water Works Lawsuit Gets More Complicated (AgDocket)

Peter Reilly, NorCal Tea Party Patriots V IRS – Grassroots Or Astroturf?

Leslie Book, Migraine Caused by Improper IRS Collection Action During Bankruptcy Stay Triggers Damages for Emotional Distress

Robert Wood, Worst Lottery To Win Is IRS Audit Lottery, So Decrease Your Odds

TaxGrrrl, Understanding Your Tax Forms 2016: 1098-T, Tuition Statement

Tony Nitti, IRS Rules On Whether Trade-In Of Private Jet Qualifies For A Tax-Free Like-Kind Exchange

Happy Blogiversary! to Hank Stern for 10 years of Insureblog.

 

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Matt Gardner, International Speedway Reaps Benefits of Revived “NASCAR Tax Break” (Tax Justice Blog). In which the Tax Justice people sctually make a lot of sense: “In the context of our growing budget deficits, the annual cost of the NASCAR giveaway is a drop in the bucket at less than $20 million, making it a small part of the $680 billion extenders package. But because its benefits are narrowly focused on a few privileged companies, the damaging effects of this tax break go way beyond its fiscal cost.”

Donald Marron, What Should We Do with the Money from Taxing “Bads”? (TaxVox)

TaxProf, The IRS Scandal, Day 996Day 997, Day 998. Day 997 links to  IRS’s New Ethics Chief Once Ordered Records Be Illegally Destroyed. These are the people who think they need to regulate tax preparers to keep us in line.

 

Scott Drenkard, David Bowie: Tax Planning Hero (Tax Policy Blog). “Taxes really matter, especially for an artist like Bowie who had a lot of options for where to reside and earn income.”

Robert D. Flach, THE TWELVE DAYS OF TAX SEASON

 

Finally, in honor of the Iowa Caucuses I quote the great Arnold Kling, who captures my feelings about these proceedings perfectly:

To me, political campaigns are not sacred events, to be eagerly anticipated and avidly followed. They are brutal assaults on reason. I look forward to election season about as much as a gulf coast resident looks forward to hurricane season.

Only the beginning of a wise and profound post. Read it all.

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Tax Roundup, 1/15/16: Tax credits and their opportunity costs. And: a turnaround in IRS service!

Friday, January 15th, 2016 by Joe Kristan

haroldReport: Tax credit for me would benefit me. Report: Tax credit would help Iowa biochemical industry (Des Moines Register).

The argument that this industry, above the thousands of industries out there, deserves funding at the expense of other businesses in the state, and that Iowa’s elected officials are just the ones to figure that out, is hard to credit. It might almost be plausible if it came at the end of a careful and systematic process where the state looked at all of the possible industries that would be good for the state to have and then carefully selected finalists based on objective and unbiased review.

That never happens.

Instead, the Bio-renewables credit is following a path blazed by the film industry and other credit recipients. Somebody decides a tax credit would be a good thing. It’s never hard to get the industry that would receive the subsidy on board. Local business boosters climb on because they know of a local business that would benefit. They fund studies to prove that this industry offers extraordinary benefits. Economic development officials join in, because that’s what they do. Politicians like giving away money, and soon you have amazing results.

I don’t fault businesses for using state tax credits. If somebody gives you money, you take it. But that doesn’t make it good policy for the rest of us.

There are two little words that credit boosters never bring up: opportunity costs. The money spent on the favored industry isn’t conjured into existence out of thin air. It is taken from somebody else. This year it’s taken from every Iowa business that uses the $500,000 Section 179 limit, which the Governor says the state can no longer afford. There are businesses in every county that will pay higher taxes if Iowa reduces its Section 179 limit to $25,000. Those businesses lose the opportunity to use funds to grow their own businesses and hire their own employees.

If there is to be any benefit here, it’s that it might actually teach the General Assembly about the opportunity costs of benefiting sympathetic industries. Here, it’s the cost of the lost Section 179 benefit to constituents statewide.

Related:

LOCAL CPA FIRM VOWS TO SWALLOW PRIDE, ACCEPT $28 MILLION

List of Iowa incentive tax credits budgeted for 2017.

 

Service: It’s in our nameA new report from the Government Accountability Office documents the decline in IRS service that we’ve all experienced under Turnaround Artist John Koskinen:

The Internal Revenue Service (IRS) provided the lowest level of telephone service during fiscal year 2015 compared to prior years, with only 38 percent of callers who wanted to speak with an IRS assistor able to reach one. This lower level of service occurred despite lower demand from callers seeking live assistance, which has fallen by 6 percent since 2010 to about 51 million callers in 2015. Over the same period, average wait times have almost tripled to over 30 minutes. IRS also struggled to answer correspondence in a timely manner and assistors increasingly either failed to send required correspondence to taxpayers or included inaccurate information in correspondence sent.

The picture they draw isn’t pretty:

 

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When you turn around, it’s important to turn in the right direction.

Related: TaxProf, GAO:  Only 38% Of Taxpayers Who Called IRS Got Through In 2015 (Down From 74% In 2010); Wait Time Increased From 11 To 31 Minutes

 

buzz20150804Robert D. Flach has your Friday Buzz! He covers ground from choosing a tax professional to extenders to a certain presidential candidate.

William Perez, How to Know if You Should Hire a Tax Attorney

Matthew McKinney, Iowa’s open records law – who, what, when, and why? (IowaBiz.com).

Kay Bell, N.J. Gov. Chris Christie kills film & TV tax credits. Good. 

Jack Townsend, Updated FAQs for SFOP and SDOP Streamlined Processes. “The IRS has updated the FAQs for the Streamlined Domestic and Streamlined Foreign Offshore Procedures.”

Leslie Book, State of the Union: Tax Administration a Small But Important Part of the Speech

Robert Wood, Beware: IRS Now Has Six Years To Audit Your Taxes, Up From Three. “The three years is doubled to six if you omitted more than 25% of your income.”

Peter Reilly, Conservation Easement Tax Deductions And Valuation Abuse. “I think this is another instance of what Joe Kristan calls using the Tax Code as the Swiss Utility Knife of public policy.”

 

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Megan McArdle, Gaming of Obamacare Poses a Fatal Threat. “The problem: People signing up during ‘special enrollment’ (the majority of the year that falls outside of the annual open enrollment period) were much sicker, and paying premiums for much less time, than the rest of the exchange population.”

Scott Greenberg, The Cadillac Tax will Now Be Deductible. Here’s What That Means. (Tax Policy Blog)

TaxProf, The IRS Scandal, Day 981. “Today, the Government Accountability Office (GAO) released two new reports regarding serious flaws in the Internal Revenue Service’s (IRS) audit selection processes. GAO confirmed that these flaws mean the IRS could continue to unfairly target American taxpayers based on their political beliefs and other First Amendment protected views.”

Robert Goulder, India’s Long Journey to a VAT (Tax Analysts Blog)

Renu Zaretsky, Winners, Losers, and Movers. Today’s TaxVox headline roundup covers last night’s presidential debate, Missouri earnings taxes, and  innovation boxes.

 

Jim Maule, Powerball, Taxes, and Math:

The expectation that widened my eyes is a meme circulating on facebook, and elsewhere, I suppose, that claims splitting the $1.4 billion evenly among all Americans would give each person $4.33 million. Good grief! This is just so wrong. The responses pointing out the error are themselves amusing, with the best one pointing out that it would generate $4.33 per person, enough to buy a calculator.

This meme:

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This explains more about the political process than I care to contemplate.

 

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Tax Roundup, 1/7/16: Taxpayer Advocate report describes IRS “pay to play” plans. And: IRS nixes plan to make charities collect tax ID numbers.

Thursday, January 7th, 2016 by Joe Kristan

20150107-2Have you heard about the IRS “Future State Plan?” Or “CONOPS?” Me neither.

The latest annual Taxpayer Advocate Report to Congress is the first I’ve heard about this mostly-secret IRS initiative. The report explains (my emphasis):

During the past year-and-a-half, the IRS has devoted significant resources to creating a “future state” plan that details how the agency will operate in five years. The plan is explained and developed in a document known as a Concept of Operations (CONOPS). There are many positive components of the plan, including the goal of creating online taxpayer accounts through which taxpayers will be able to obtain information and interact with the IRS.

However, the CONOPS also raise significant questions and concerns. Implicit in the plan — and explicit in internal discussion — is an intention on the part of the IRS to substantially reduce telephone and face-to-face interaction with taxpayers. The IRS is hoping that taxpayer interactions with the IRS through online accounts will address a high percentage of taxpayer needs. It is also developing plans to enable third parties like tax return preparers and tax software companies to do more to assist taxpayers for whom online accounts are insufficient — an approach that will increase compliance costs for millions of taxpayers.

Nina Olson, Taxpayer Advocate

Nina Olson, Taxpayer Advocate

The IRS, as usual, is cooking this all up in secret, with only well-connected insiders in on the plan. Tax Analysts describes the report ($link):

A major concern is the aura of secrecy around the CONOPS documents. Despite the fact that the IRS is conducting internal discussions about its “future state” plans, Olson’s report says the Service has repeatedly declared CONOPS data elements and documents “official use only” and not for public dissemination. “Never before has the IRS made this assertion in so many instances,” the TAS report says. One area where the IRS has shared its CONOPS plans — the Large Business and International Division — caters to a group of taxpayers that can afford to “pay to play,” the TAS said, while future service plans remain under wraps for the roughly 150 million individual taxpayers and 54 million small business taxpayers.

If you look at it from the viewpoint of most taxpayers, this plan seems incomprehensible. But if you believe that the IRS is really trying to serve the interests of the national tax prep franchise outfits, national accounting firms, and the biggest law firms, it completely makes sense.  It actually fits in well with the IRS preparer regulation efforts to eliminate competition for the national tax prep firms — a regulation effort that the Taxpayer Advocate still regrettably and unwisely supports. Those who are drafting the new taxpayer service labyrinth can be expected get nice raises by going out into the tax industry to help their new employers navigate through it.

Related: Leslie Book, The National Taxpayer Releases Annual Report to Congress (Procedurally Taxing); Accounting Today, Taxpayer Advocate Concerned about IRS Plans for ‘Pay to Play’ Taxpayer Service,

 

Another IRS screw-up averted. I just received a Tax Analysts breaking news email saying:

The IRS has withdrawn proposed regulations that would implement the statutory exception to the contemporaneous written acknowledgement requirement for substantiating charitable contribution deductions of $250 or more.

These rules would have required donors to provide charities with their social security numbers — a horrible idea in the identity theft era. Expect the IRS to try to sneak them back in when they think people aren’t looking.

 

Nicole Kaeding, American Migration in 2015 (Tax Policy Blog).
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Four of the ten states with the most inbound migration have no personal income tax. Most of the states where the population is fleeing have very hign income taxes, including Illlinois, Connecticut, New York and New Jersey. To be fair, high-tax Vermont seems to be attracting people, probably from dysfunctional New York.

This won’t help inbound migration. Illinois Announces Plans To Delay Tax Refunds Through March (TaxGrrrl)

Kay Bell, Delayed state tax refunds in Illinois, Louisiana & Utah because of tougher tax identity theft procedures. And because Illinois is broke.

Robert Wood, Obama Executive Action? Tax Hikes Could Be Next. “President Obama has stretched executive authority with immigration and gun law changes. And he is “very interested” in executive action on taxes too.”

Jack Townsend, Government Asserts Wylys’ Fraud in Bankruptcy Court. It’s a multibillion dollar tax case involving offshore trusts and a “blame the tax pro” defense. Mr. Townsend goes deep on the cases being made by both sides.

Paul Neiffer, “BIG” Might Not Be a Problem. Paul discusses the now-permanent five year “recognition period” for S corporation built-in gains.

William Perez lists Tax Deadlines for 2016

Robert D. Flach posts MY ANNUAL POST FOR JOURNALISTS AND BLOGGERS, reminding us all that he doesn’t care for conflating “tax professional” with “CPA.”

Peter Reilly, No Foreign Income Tax Exclusion For Army Civilian In Afghanistan

Tony Nitti, Love In The 21st Century: Bad Breakup Leads To Form 1099, Lawsuit. I’m not a trained relationship professional, but I think its safe to observe that issuing a 1099 to your ex-girlfriend burns all the bridges.

 

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Megan McArdle, Closing Tax ‘Loopholes’ Would Choke the Middle Class. “If you want to pay for any major new program by “closing the loopholes,” it is these loopholes that you will need to close, because the amount of revenue raised by, say, doing away with carried interest treatment of sweat equity partnership stakes works out to a rounding error on the federal budget.”

David Brunori, Taxing Guns Is Just Wrong (Tax Analysts Blog). “The fact is that a gun tax will have no effect on gun violence.”

TaxProf, The IRS Scandal, Day 973. A dispatch from the denialist front.

 

News from the Profession. #BusySeason Has Arrived (Caleb Newquist, Going Concern).

 

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Tax Roundup, 1/5/16: Start your year-end planning today! And: private tax audits for fun and profit!

Tuesday, January 5th, 2016 by Joe Kristan

IMG_1182Welcome to 2016. We’ve just finished another round of 2015 year-end planning. It’s too soon for most of us to be working on our 2015 filings, given the need for 1099s, W-2s, K-1s, etc. But it is a good time to start getting things in order for 2016.

Too many people want to know the last day they can do something for their tax planning. It’s better to worry about the first day to do something. Many tax moves are best done at the beginning of the year. If you fund a tax-deferred account at the beginning of the year, you start sheltering the investment income from taxes 15 1/2 months sooner than somebody who waits until the end of the year.

Here are a few 2016 tax planning moves you can make right now:

Fund an IRA. You can fund a 2016 IRA to the extent of the lesser of your 2016 earned income or $5,500 – or $6,500 if you are going to be 50 years old by year-end. You don’t have to wait until you have earned that $5,500 or $6,500; if you are still working, you’ll get there. And don’t forget a spousal IRA, same limits.

Health Savings Accounts for 2016 can be funded up to $6,750, or $7,750 if you will reach age 55 by year-end.

A 55 year-old working couple with a high-deductible health plan can stash $20,750 in tax-deferred IRAs and HSAs today and shift the earnings on those funds to the non-taxable category now, instead of waiting until April 2017. Not only do they start their tax savings right away, but they aren’t tempted to spend that money between now and then.

While Section 529 plans can’t generate deductions like HSAs and traditional IRAs, they do shelter investment earnings like HSAs and IRAs, and they have more flexible contribution limits. The IRS explains:

Contributions can not exceed the amount necessary to provide for the qualified education expenses of the beneficiary. If you contribute to a 529 plan, however, be aware that there may be gift tax consequences if your contributions, plus any other gifts, to a particular beneficiary exceed $14,000 during the year.

Taxpayers filing in Iowa can deduct their contributions to the College Savings Iowa Section 529 plan up to $3,188 per beneficiary, per donor on their Iowa income tax return. A married couple funding plans for their two children can therefore deduct up to $12,752 in 2016 CSI contributions.

So start that 2016 year-end planning right away!

 

Tax Analysts reports ($link) that a Chicago Whistleblower Has Filed 938 FCA Tax Cases, Attorney Says. It quotes the director of the Illinois Department of Revenue, Connie Beard, talking about False Claims Act lawsuit trolling:

Beard told the lawmakers that the suits “are not true whistleblower lawsuits,” wherein an insider who has knowledge of a company’s fraudulent behavior seeks to report it to the state. “These are lawsuits that simply accuse business taxpayers, big and small, of incorrectly collecting and reporting tax,” she said.

As if Illinois wasn’t hopeless enough.

 

nytchart20151229-7Scott Hodge, IRS “Fortunate 400” Report Shows Evidence of Significant Income Shifting to Avoid Fiscal Cliff Tax Rate Hikes (Tax Policy blog). They show how taxpayers shifted income to beat the 2013 tax hikes:

Finally, we get to the bottom line and can see that taxable income declined 23 percent in 2013 to $85 billion from $111 billion in 2012.

So what explains this? Well, the more interesting narrative to come out of the IRS report is the evidence of income shifting in 2012 as the 400 wealthiest taxpayers anticipated the eventual tax increases on personal and investment income that would result from the fiscal cliff tax legislation.

Nearly all the major sources of income for these 400 taxpayers were up significantly in 2012 compared to 2011, as they pulled income from the future into a lower-tax year…

The lesson here is that high-income taxpayers have considerable flexibility as to how and when they report income. Headlines reporting that the rich are paying higher average tax rates as a result of the fiscal cliff deal don’t really tell the whole story.

People aren’t stupid. If they have a choice between recognizing income in a low-tax or a high-tax year, a sensible person picks the low-tax one. As the biggest source of income of the “400” is capital gains, there was a lot of pressure to beat the 2013 rate hikes from 15% to 23.8%.

Related coverage here.

 

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Robert D. Flach gets 2016 started with a bang Buzz! A tremendous link fest to start they year.

William Perez, How Soon Can We Begin Filing Tax Returns?

Andrew Mitchel, Flowchart – Section 267(a)(2) & (3) Related Party Matching Rules (International Tax Blog). Andrew’s charts are a wonderful resource.

Annette NellenTop Ten Items of Tax Policy Interest for 2015 – #10. The “gig economy.”

Kay Bell, 2016’s first tax tip: Filing season starts on Jan. 19

Jason Dinesen, Choosing a Business Entity: LLC. “LLCs provide legal protection much like a corporation, but LLCs are easier to form and are generally easier to administer.”

Jack Townsend, Judge Criticizes Prosecutor’s Use of Language Directing Secrecy for Receipt of Grand Jury Subpoena. “I hope that all readers of this blog know that grand jury proceedings are generally secret and the grand jurors and government actors in the process must keep them secret.  FRCrP 6(e)(2), here.  But the obligation of secrecy is not imposed on witnesses before the grand jury.”

Jim Maule, Taking (Tax Breaks) Without Giving (What Was Promised). “Too many tax breaks are handed out in exchange for promises by the recipients to do something beneficial for the community at large.” Once the politicians issue the press release and cut the ribbon, they have what they want, and they don’t much care what happens next.

Peter Reilly, Family Partnership Valuation Discounts Approved By Tax Court. A big year-end Tax Court case is discussed.

Leslie Book, NY Times Article Today Highlights Why People Pay Taxes as Well as Some of My Favorite PT Posts of 2015 (Procedurally Taxing)

Robert Wood, 2016 Brings IRS Power Over Passports, Use Of Private Debt Collectors

TaxGrrrl, 100 Things You Absolutely Need To Know About Money Before You’re 35

Tony Nitti, Ben Carson Releases Tax Plan, Promises End To Mortgage Interest, Charitable Contribution Deductions.

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TaxProf, The IRS Scandal, Day 967Day 968Day 969Day 970Day 971.

Howard Gleckman, What Can Congress and President Obama Accomplish in 2016? Pray they don’t define “accomplish” the same way.

2015 top news from the profession. Going Concern Editor’s Picks for 2015: Relationships at Work, Bad Auditing, Women in Accounting and More (Caleb Newquist, Going Concern)

Russ Fox, My Day on Jury Duty. Congratulations to Russ on getting it out of the way January 4.

 

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Tax Roundup, 12/29/15: No year-end basis, no S corporation loss. And: ACA 1095 deadlines extended.

Tuesday, December 29th, 2015 by Joe Kristan

S-SidewalkBasis or bust. With the re-enactment of bonus depreciation for 2015, some S corporations find themselves with taxable losses for 2015. That won’t do much for the 2015 tax returns of S corporation shareholders who have no basis in their stock at year-end. While they also have to get by the “at-risk” and “passive loss” limits, they don’t even get to those problems without basis.

A taxpayer’s initial basis in an S corporation is the amount paid for the stock. It is increased by capital contributions and by undistributed income of the S corporation. It is reduced by distributions of S corporation earnings and by S corporation losses. If there have been 2015 distributions, they count before the losses do.

A shareholder with no stock basis can still get deductions by loaning money to the S corporation by year-end. The loan has to meet the at-risk rules (it can’t be funded by another shareholder or by the corporation, for example), but if it meets those requirements, it can create basis for S corporation losses. But don’t do anything hokey like making a loan on December 31 and having the corporation repay it on January 3.

It’s a trap! Well, it doesn’t have to be, but remember that any losses you take against a loan reduce the basis of the loan. That means that if the loan is repaid before the losses are restored by S corporation income, the repayment will be taxable gain to the extent of the unrestored losses.

This is another installment of our 2015 year-end planning tips series running through December 31. Collect them all!

 

1095-C cornerIRS delays due dates for 1095-B and 1095-C reporting2015 is the first year many employers are required to file a new form documenting insurance coverage, or offers of coverage, for their employees. Apparently many employers are still scrambling to figure out how to comply with the complex rules, because yesterday the IRS announced (Notice 2016-4) a delay in the deadlines for providing these forms to employees and to the IRS. A summary:

2016-4 deadlines

Employers are encouraged to file under the old deadlines if they can, but they now have a blanket extension, with no need to file any extension request.

While the IRS will be processing forms starting January 16, this announcement tells us that millions of taxpayers will lack the forms they need to properly report their ACA tax credits or penalties for inadequate coverage. The IRS says that employees can rely upon “other information received” from employers or insurers, and do not have to amend returns if the 1095s they receive later show that their original amounts are incorrect. What could possibly go wrong with this? Aside from rampant errors and outright fraud, I mean.

We are now approaching six years since the enactment of the ACA, and it’s still a mess.

Related: Russ Fox, IRS: We’ll Trust You on Health Insurance for 2015 Because… “We won’t have delays regarding filing returns because taxpayers haven’t received Forms 1095-B or 1095-C as long as they’re aware of their health insurance coverage. That’s a very good thing for all.”

 

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If you are trying to lose weight added by holiday treats, go to Robert D. Flach’s place for a “slender” Tuesday Buzz!

TaxGrrrl, 12 Days Of Charitable Giving 2015: Red Paw Emergency Relief Team

Robert Wood, House Oversight Probes Hillary Speech Fees To Clinton Foundation. The assignment of income rules only apply to little people.

Leslie Book, PATH, CDP Venue and Berglund v Commissioner, A Recent Tax Court Case Where Venue Matters (Procedurally Taxing)

Jason DinesenFrom the Archives: Taxation of Emotional Distress Payments

Kay Bell, 10 tax-saving things to do by December 31

Jana Luttenegger WeilerLast Minute Tax Extenders – 2015 Edition (Davis Brown Tax Law Blog)

William Perez, Protecting Americans from Tax Hikes Act of 2015

Annette Nellen, Top Ten Items of Tax Policy Interest for 2015 – #6 and #7. Includes coverage of the return due date changes enacted this year.

Me, Forget April 15. Well, don’t, actually, but Dec. 31 matters more. My latest at IowaBiz.com, the Des Moines Business Record Business Professionals’ Blog.

 

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TaxProf, The IRS Scandal, Day 964.

Renu Zaretsky, Bans, Subsidies, Searches, and Bubbles. Today’s TaxVox headline roundup covers new EITC restrictions and Nevada’s corporate welfare cornucopia for Tesla, among other morsels.

Stephen Entin, Disentangling CAP Arguments against Tax Cuts for Capital Formation: Part 4 (Tax Policy Blog). “Most major tax bills of the last thirty years have provided serious tax reductions or refundable credits (resulting in negative taxes) for lower income families. These are extraordinarily expensive, but do next to nothing to promote capital formation to raise productivity, wages, and employment.”

 

Caleb Newquist, Opening Day of Tax Season Less Than a Month Away (Going Concern). “Anyone with a PTIN is due to report on January 4.” Haven’t renewed your PTIN yet? Get on it!

 

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Tax Roundup, 12/21/15: Winter’s here, along with a new tax law. Fixed-asset planning time!

Monday, December 21st, 2015 by Joe Kristan

20151211-1It’s the darkest day of the year, but with the signing of the Extender Bill, H.R. 2029, we are no longer in the dark for year-end fixed asset tax planning. The “PATH” act has some important fixed-asset provisions:

A permanent (and inflation-indexed) $500,000 annual limit for Section 179 deductions. This provision lets qualifying taxpayers deduct currently fixed asset costs that would otherwise have to be capitalized and depreciated over multiple years.

“Bonus Depreciation” is extended through 2019. This provision allows taxpayers to deduct 50% of the cost of depreciable property in the first depreciable year, with the remaining cost depreciated over the property’s normal tax life. Unlike Section 179, it cannot be taken for used property, but unlike Section 179, it can be used to generate net operating losses.

-15-year depreciation is made permanent for “Qualified Leasehold Improvement Property , Qualified Restaurant Buildings and Improvements, and Qualified Retail Improvements. These rules enable taxpayers to depreciate these items over 15 years, rather than the usual 39 year life for commercial buildings.

In theory, this provides a great opportunity to knock down your 2015 tax bill with last-minute purchases of fixed assets. But there’s a catch. It’s not enough to buy and pay for new fixed assets to deduct them this year. They also have to be “placed in service” by year end. From the IRS publication on depreciation:

You place property in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. Even if you are not using the property, it is in service when it is ready and available for its specific use.

Example 1.

Donald Steep bought a machine for his business. The machine was delivered last year. However, it was not installed and operational until this year. It is considered placed in service this year. If the machine had been ready and available for use when it was delivered, it would be considered placed in service last year even if it was not actually used until this year.

It’s not enough to have a new machine in crates on the loading dock. It has to be set up and ready to go. If you are buying a farm building, having it in pieces waiting for assembly doesn’t get you there.

That’s why year-end purchase of vehicles and farm equipment are popular. Once they arrive, they are pretty much ready to go. But you have to actually take delivery. “On order” isn’t enough. And remember that there are limits on the amount of Section 179 deduction and depreciation for passenger vehicles.

This is the first installment of our 2015 year-end planning tips series

 

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Russ Fox, Once Again, the IRS Doesn’t Start by Calling You:

My mother received a phone call on Saturday morning at 6 am from “Agent Smith” of the IRS demanding immediate payment of her taxes or she would find herself “thrown in jail.” Yes, the scamsters are still out there.

Now imagine you’re a senior citizen, and you get a phone call waking you up telling you to pay the IRS or you’ll find yourself in prison. It doesn’t take a genius to know that these scamsters can intimidate their victims.

Remember, if the caller demanding payment and saying the police are coming says he’s from IRS, he’s not from IRS.

Tony Nitti, Tax Court: Luring Pigs To Untimely Demise With Kool-Aid Counts As Material Participation. Sooey!

Robert D. Flach, THERE IS STILL TIME TO TAKE ADVANTAGE OF A “QCD” FOR 2015!

 

Paul Neiffer, Wind Energy Credits Extended and Phased-Out

Annette Nellen is counting down the “Top Ten Items of Tax Policy Interest for 2015.” #1 is non-tax bills used to change the tax law; #2 is IRS Funding Challenges. Anybody who is serious about improving IRS funding should be demanding the resignation of Commissioner Koskinen. Nobody’s going to trust him with extra funding.

Jason Dinesen, From the Archives: Insolvency and Canceled Debt: Make Sure You Can Prove It!

Jim Maule, Winning Back Your Tax Payments. “A reader made me aware of a recent suggestion that every taxpayer who files a timely and honest tax return, along with timely payment, be entered into a lottery.” It a way, that’s already true.

Leslie Book, Extenders Bill Gives IRS Additional Powers to Impose Penalties on Preparers and Disallow Refundable Credits (Procedurally Taxing). “Under the new law,  the accuracy-related penalty can be applied to any part of a reduced refundable credit subject to deficiency procedures.”

Peter Reilly, Bernie Sanders And The 90% Income Tax Rate That He Does Not Call For. ” Bernie Sanders wants us to have an economy like it was in the sixties and early seventies, when a summer of hard work could pay a year’s tuition and there were plenty of factory jobs that would support a family.” Maybe Bernie should reconsider his nostalgia.

Robert Wood, New Law Says Money For Wrongful Convictions Is Tax Free

TaxGrrrl, 12 Days Of Charitable Giving 2015: Wounded Warrior Project

Kay Bell gets into the holiday spirit with Christmas gifts for tax and financial geeks

 

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TaxProf, The IRS Scandal, Day 954Day 955Day 956. Coverage of the limits on IRS power included in the extender and omnibus legislation.

Alex Tabarrok, Subsidies Increase Tuition, Part XIV (Marginal Revolution):

Remarkably, so much of the subsidy is translated into higher tuition that enrollment doesn’t increase! What does happen is that students take on more debt, which many of them can’t pay.

So naturally the Extenders bill made the American Opportunity Tax Credit permanent.

Jared Walczak, The Opening Salvo of 2016’s Soda Tax Battle (Tax Policy Blog). “Soda taxes are poised to be on the agenda in many cities in 2016, an effort spearheaded by former New York City Mayor Michael Bloomberg.” I propose a tax on people who can’t mind their own business.

Renu Zaretsky, Promises, Hopes, and Complaints. Today’s TaxVox headline roundup covers Hillary promises, Nevada trolling for ribbon-cuttings with taxpayer money, and Apple’s CEO tax code thoughts: “He wants changes to the US tax code, which ‘was made for the Industrial Age, not the Digital Age… It’s backwards. It’s awful for America.'”

 

News from the Profession. Let’s Help Deloitte Global CEO Punit Renjen With His First Tweet (Caleb Newquist, Going Concern).

 

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Tax Roundup, 12/11/15: Extender battle extended to next week; efforts to make some breaks permanent continue. And: Tina, Accidental American.

Friday, December 11th, 2015 by Joe Kristan

20151211-1Extending the week. Congress had been scheduled to go home today, but now it looks like the session will drag through the weekend while they try to agree on spending and tax legislation.

Whither the extenders? The Hill reports that hope lives for permanent enactment of several of the important Lazarus provisions that have repeatedly died – most recently at the end of 2014 — and that need to be revived to be used on 2015 returns. From the report:

I understand the current projection is for the House to post the omnibus Monday and vote on it by Wednesday,” Senate Republican Whip John Cornyn (Texas) told reporters. “The goal is to wrap things up by Wednesday evening.”

He said the omnibus would be linked to a package extending expiring tax provisions. Senate negotiators say that package is likely to make several important tax breaks open-ended and place a moratorium on two ObamaCare taxes.

“They seem to be linked, although I can’t tell you whether it will be one vote or two votes, but clearly they’re part of the overall negotiations,” he added.

What would be made permanent? At least the R&D Credit and the $500,000 Section 179 deduction. These would be accompanied by permanent, and maybe increased, earned income credits, child credits, and education credits. How likely is it? The Hill says “Senate sources on Thursday said the chances of reaching a deal on a major tax deal were greater than 50 percent.”

Nothing is certain, though. Tax Analysts reports ($link) Permanent Tax Extenders Deal Continues to Elude Lawmakers. It quotes Rep. Steve Israel (D-N.Y.) as insisting that the child credit be indexed to inflation, and that other obstacles to agreement remain:

Israel noted that ultraconservative Republicans object to including renewable energy tax credits and family credits in the extenders deal, so votes from House Democrats are still essential regardless of what deal Senate Democrats reach with Republicans.

Here I’ll just note that there appear to be no such thing as “ultraliberals” to reporters, while “ultraconservatives” abound.

Rep. Bill Flores, R-Texas, chair of the House Republican Study Committee, said December 2 that his group believes that renewable energy credits should be phased out. “Special interest giveaways like the wind production tax credit and the solar investment tax credit have overstayed their welcome and their usefulness,” he said.

Flores’s group also does not support family credits, which he called “stimulus legacy items” that should not be renewed without heightened verification and oversight.

These obstacles could result in another two-year extension of the expiring provisions, though complete failure remains an option.

Prior coverage:

Ways and Means Chair introduces a Plan B as permanent extender talks continue.

Extender week?

 

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Just how stupid is U.S. foreign taxation? This stupid. A heartbreaking and infuriating piece by Allison Christians shows the brain-dead Kafkaesque nightmare created by Congress and enforced by IRS to “crack down” on overseas taxpayers: Understanding the Accidental American: Tina’s Story. It tells the story of a 62 year-old woman who was born in the U.S. while her parents were students, but has lived all but her first six months in Canada. Ms. Christians makes a powerful case:

Related to that point, I think a taxpayer has a right to learn that her whole financial life is subject to harsh deterrents and penalties solely for the reason that it is not located in the United States, even and especially when she is not located in the United States. Again, I think she has the right to learn that not from blogs or word of mouth, but from the government that seeks to impose these rules on her. I think she’s got a right to be informed about a life-destroying force like PFIC by the government that seeks to unleash that force upon her, and a right to avoid that punishment by making different choices. And if that government can’t or won’t bother to inform her, or address the utter absurdity of stripping a person of their life savings as a consequence of inadequate form filling, I think she’s got a reason to complain that this is a pretty unfair administration of a very complex law — a law designed for millionaires with expensive tax accountants and not for Canadians carefully saving for retirement and not hiding anything from anyone.

When the IRS and the politicians crow about how effective their foreign enforcement efforts are, remember that a lot of it is coming out of the pockets of taxpayers like Tina.

(Via the TaxProf).

 

Kristine Tidgren, Iowa Court of Appeals Says LLC Corporate Veil Properly Pierced (The Ag Docket).

The court found that the trial court’s finding of inadequate capitalization was supported by substantial evidence. In so finding, the court noted the defendants’ history of moving funds between related entities, the lack of LLC assets and employees, and its failure to reduce losses to the plaintiff, despite knowing its funding was inadequate.

This sort of ruling will make businesses leery of using Iowa entities. An appeal to the Iowa Supreme Court is likely.

 

buzz 20151023-1Friday means Buzz day for Robert D. Flach. Today he covers the legislation requiring IRS to use private debt collectors, preparer regulations and more.

Jana Luttenegger Weiler, Delinquent Taxes May Mean No Passport. “ Imagine the problems for a taxpayer who is unaware of this new rule and not finding out until being stranded in the midst of traveling.”

Jason Dinesen, Choosing a Business Entity: Determining S-corporation Reasonable Salary. “A salary that’s considered reasonable for one corporation may not be reasonable for another corporation.”

Leslie Book, Tis the Season For Tax Procedure Legislation (Procedurally Taxing).  “Under the new legislation, the failure to file penalty may not be less than the lesser of $205 or 100 percent of the amount required to be shown as tax on the return (it used to be $135 or 100%).”

Robert Wood, Three Moves In December To Save Taxes Next April

TaxGrrrl, How Answering A Simple Question Makes You An Easy Target For Identity Thieves

 

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TaxProf, The IRS Scandal, Day 946

Nicole Kaeding, Proposed Tax Increases in Alaska. Alaska may get an income tax.

Steven Rosenthal, Hillary Clinton Proposes Tough New Curbs on Corporate Tax Inversions (TaxVox). The “beatings will continue until morale improves” approach.

News from the Profession. Grant Thornton Hoping to Bring Soul-Crushing Disappointment to Charlotte Hornets With New Sponsorship (Caleb Newquist, Going Concern).

 

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