Posts Tagged ‘Linda Beale’

Tax Roundup, 11/15/2013: Trains, Zeppelins and Fertilizer edition.

Friday, November 15th, 2013 by Joe Kristan

 

20121226-1What, no zeppelin port?   A candidate for Iowa governor proposes a gas tax increase for, well, a bunch of stuff, reports QCTimes.com:

Democratic gubernatorial hopeful state Sen. Jack Hatch is proposing to phase in a 10-cent gas tax increase to pay for overdue road and bridge improvements, build passenger rail links, construct flood protection, reduce the backlog of school construction projects and expand broadband service in rural Iowa.

The increase would amount to less than $50 a year for most Iowans, he said.

Infrastructure, in all of its forms, is one of the most basic parts of state and local government, Hatch said Thursday in announcing his Building a Better Iowa infrastructure plan.

The idea of a continuing “infrastructure crisis” is a standard political assertion, even though it isn’t true.   If it were, though, you’d stop the list of crisis projects after “bridge and road improvements.”   The idea that blowing millions to construct an unneeded and money-losing passenger rail system is an infrastructure priority is laughable.  Local school districts can finance improvements whenever their voters think they’re worth a bond issue.  And rural broadband, supplied by the government?  Because satellites don’t cover rural Iowa?

 

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Using your wife’s money to buy drinks for your new girlfriends.  Sen. Hatch wants to run against Governor Branstad next November, who has some economic issues of his own.  These are spotlighted by the Governor’s selection as “Politician of the Year” by Site Selection Magazine.

Based on its website, Site Selection Magazine seems to be the trade journal of the little industry of fixers and middlemen who harvest taxpayer money for clients choosing to relocate or expand. Governor Branstad was “honored” for giving over $80 million of tax credits to the Orascom fertilizer plant in Southeast Iowa to build a plant they were probably going to put there anyway.  The credits add up to around $500,000 per “permanent” job.

These sorts of giveaways are great for the companies that can play the system to milk the fisc, but they aren’t so great for the rest of us who pay for them.  They are the government equivalent of the guy who takes his wife’s bar to the bar to buy drinks for the girls.  He may think he’s doing great things, but it’s neither impressive to the girls nor helpful to the wife.

Somebody out there is saying, “but what about the jobs?”  Even if you assume that the spending is responsible for the jobs — a stretch — that money wasn’t just conjured up.  It comes from the rest of us, who would have used it to create jobs through spending or investing.  If you think the state can wisely allocate investment capital, I have a nice film credit program to discuss with you.  You shouldn’t talk about the jobs you attract by giving away money without talking about the jobs that you lost.

 

Arnold Kling, It’s Implementation, Stupid:

The problems with implementation are under-rated and always have been. The Obama Administration has spent 3 years bulldozing the individual market in health insurance. Now, they expect the health insurance companies to rebuild it in 30 days.

This will not end well.  But while I expect enormous changes in the ACA law, given its evident failure, I don’t expect repeal of the new 3.8% net investment income tax or .9% additional medicare tax to happen.  Clearing the wreckage will be expensive.

Des Moines Register,  136 Iowans buy private health plans through online marketplace.  Not looking good.

Why not just kill me now?  Why Not Use Tax Preparers as a Portal to Health Exchanges?  (Howard Gleckman, TaxVox)

 

TaxProf, Number of Taxpayers Who Renounced U.S. Citizenship Skyrockets to All-Time Record High.  This doesn’t strike me as a good thing.

 

Kay Bell,  EITC claim issues prompt IRS letters, visits to tax pros.  If you prepare a lot of EITC claims, your documentation needs to be meticulous.

Jack Townsend, IRS Indian Initiative for Persons Outside OVDP; Also on Quiet Disclosures

Linda Beale, IRS will issue summonses for offshore bank account info

William Perez,  How Much Government Do People Get Compared to How Much Taxes They Pay?

 

TaxGrrrl, Braves New World? Taxpayer Funding Remains A Concern As Atlanta Rushes Towards New Stadium.  If I were an Atlanta taxpayer, I’d be concerned.

Tony Nitti, Did The Sale Of Stan Musial’s Memorabilia Give Rise To A Hefty Tax Bill?   

 

Kyle Pomerleau, Don’t Forget the Facts If You Want to Raise Taxes on the Rich (Tax Policy Blog)

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Christopher Bergin, The IRS: A Greek Tragedy (Tax Analysts Blog)  ”I mostly also agree with Olson that much of the impairment at the IRS is caused by Congress continuing to force the agency to do more with less.”

TaxProf, The IRS Scandal, Day 190

Robert D. Flach has your Friday Buzz!

News from the Profession:  Perhaps Comparing the CPA Exam to Actual War Isn’t The Best Idea (Going Concern)

 

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Tax Roundup, 10/29/13: The case against the research credit. And no tax break for bike-shares.

Tuesday, October 29th, 2013 by Joe Kristan
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Flickr image courtesy Windy_ under Creative Commons license

Martin Sullivan, ‘Extortion’ and the Research Credit (Tax Analysts Blog) is the first prominent tax commentator I’ve seen who sees the research credit the much the way I do (my emphasis):

The problem is not with the theory of the credit but with its execution. I have been around a while and have researched the research credit since its inception in 1981. My take is that the essential problem of the credit has only grown worse: It is impossible to find a practical definition of subsidy-worthy research in the 21st century. It is less clear than ever where corporate research ends and other innovation-inducing functions like design and software development, begin. There is little empirical work regarding why, in this modern economy in which investment spending defies categorization, some business-building activity should be subsidized and others not. This inability to target incentives to where they should go means scarce resources are inappropriately and arbitrarily assigned to certain activities, certain businesses, and certain industries while others are left in the cold. What was intended as an incentive for productive activity by clever scientists and engineers turns out to be an incentive for totally unproductive activity by clever lawyers, accountants and lobbyists.

So true — though the accountants do use clever engineers to help turn stuff businesses do anyway into “research.”  I’m convinced that the credit is almost entirely harvested by businesses doing what they would do anyway.

Repeal of the research credit could fund a reduction of approximately 1 percentage point in the corporate tax rate. The benefits of the credit as it works in practice are questionable. In contrast, a reduction in the corporate rate would undoubtedly be a big plus for America’s competitiveness.

That’s right.  The IRS is institutionally incapable of distinguishing between worthwhile “research” and other spending.  If the IRS can’t competently police a tax spiff, get rid of the spiff and lower the rates for everyone.

 

Andrew Lundeen, Scott Hodge,  About Half of Tax Returns Report Less than $30,000 (Tax Policy Blog)

The median taxpayer earns roughly $33,000. This means that half of the 145 million tax filers (about 72 million or so) earn less than $33,000 and half earn more. While only about 14 percent of taxpayers earn more than $100,000, they pay the vast majority of all income taxes in America today.

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Compare that with who pays:

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In other words, The bottom half of the distribution’s income tax burden is actually negative.

 

TaxGrrrl,  10 Things You Need To Know About Getting Married & Taxes

Kay Bell, A clearer look at maximizing medical tax deductions

Paul Neiffer,  Setup Your Deferred Payment Contracts Now:

The election is on a contract by contract basis so it is important to have at least a couple contracts in the $20-30,000 range to allow for the correct amount of adjustments to income.  If you have only one contract for $150,000, that may not give you the best flexibility.   

It’s one of those sweet tax planning tools that would be bizarre and subject to penalties for most of us, but is just Tuesday for farmers.

 

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Flickr image courtesy Galpalval under Creative Commons license

Robert W. Wood, Bike Share Programs Are Not Tax-Free, Says The IRS  (Via the TaxProf).  The IRS says bikes borrowed from rent-a-bike stands, like those in downtown Des Moines, can’t be a reimbursed as a “qualified transportation fringe benefit.”  In contrast, expenses of personally-owned bikes qualify.

 

Phil Hodgen is running a series on the tax effects of expatriating.  He’s gotten ahead of me, so I’ll start at the beginning and add a link every day, starting with  Chapter 1 – A Quick Overview of the Exit Tax.

Jack Townsend, Does Our Criminal Justice System Find Truth Well And What is the Tolerance for Error?  “The question is whether our traditional criminal justice system for finding truth by triers of fact — usually juries but sometimes judges — really do it well and how much confidence can we have that they do it well.”

 

Jeremy Scott, Revenue Divide Will Likely Derail Conference Committee (Tax Analysts Blog)

TaxProf,  The IRS Scandal, Day 173

Tax Justice Blog, PricewaterhouseCoopers Report Quietly Confirms Low Effective Tax Rates for Corporations But Directs Attention to Irrelevant Figures

Linda Beale,  Carried Interest — a tax privilege for the rich whose end time has come.  Except it’s not just for “the rich,” and it would do more harm than good.

 

Keith Fogg, Vince Fumo: IRS Finding of Jeopardy (Procedurally Taxing)  ”As mentioned in a previous post, the Service recently invoked the rarely used jeopardy assessment procedure against former state Senator Vince Fumo in connection with the activities leading to his criminal conviction.”

Robert D. Flach says it’s TIME FOR YEAR-END PLANNING.

 

News from the Profession:  “Is the CFO’s quitting time after 3 pm?” Coming to an Auditor’s Questionnaire Near You (Going Concern)

 

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Tax Roundup, 9/24/2013: Departures edition – with and without benefits. And: Career Corner!

Tuesday, September 24th, 2013 by Joe Kristan

 

Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

The IRS official at the center of the Tea Party scandal is retiring.  Iowa Public Radio reports that Lois Lerner is retiring:

The IRS announced Monday that Lerner would step down after being placed on paid leave in May. She refused that month to answer questions at a congressional hearing, citing the Fifth Amendment right not to incriminate herself.

The scandal involved groups applying for 501(c)(4) status in the period 2010-2012. Organizations with the words “Tea Party” or “patriot” in their names faced more questions and bureaucratic delays, although some progressive groups also encountered bureaucratic hassles, according to an inspector general’s report.

In a statement emailed to NPR, the IRS said the problems identified with screening tax-exempt status requests were the result of “mismanagement and poor judgment.” 

In a change of procedure, the IRS announced the retirement via a press release, rather than by planting a question at a continuing education event.

Tax Analysts ($link) reminds us of the compliance hassles that Ms. Lerner piled on all sorts of exempt organizations:

One of the more notable developments during Lerner’s tenure as exempt organizations director was the comprehensive redesign of Form 990, “Return of Organization Exempt From Income Tax.” The new version requires EOs to provide much more information about their activities than previously. 

Anyone who works with exempt organizations, or who serves on an EO board, knows how much additional useless busywork costs the new 990 imposes.

Lerner also oversaw a massive IRS outreach to get EOs that had not filed information returns for three straight years to come into compliance to avoid automatic revocation of exemption.

By “outreach” they mean “revoked their tax-exempt status.”  Thanks for leaving, Ms. Lerner, you’ve done quite enough.

Related: TaxGrrrl, Lesson Lerner-ed? Disgraced IRS Official Tenders Resignation  

 

 

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Rashia Wilson in happier days.

While we say good-bye to Ms. Lerner, let’s spare a moment to note a different sort of departure, one involving somebody who may have had more influence on tax administration than Ms. Lerner.  TBO.com reports (my emphasis):

Three years after Tampa police stumbled on the first active tax-refund fraud operation they had seen, one of the suspects was sentenced Monday to eight years and five months in federal prison.

Maurice “Thirst” Larry faces even more prison time when he is sentenced today in another case in which his girlfriend, Rashia Wilson, is serving 21 years of federal time. Larry is expected to face a longer term in the second case because it involves the theft of millions of dollars, while the other case involved hundreds of thousands of dollars.

Larry and Wilson, along with Marterrance “Qat” Holloway, are viewed as pioneers in the wave of stolen identity tax-refund fraud that has flooded the streets of Tampa, dubbed the epicenter of a national epidemic that has cost U.S. taxpayers billions and left countless identity theft victims to pick up the pieces.

This sort of fraud costs the Treasury around $5 billion annually, while creating financial nightmares for taxpayers whose identities are stolen.  The flat-footed IRS response is one of the greatest failures of tax administration since the tax law was enacted.

What sort of devious criminal geniuses could crack open the Treasury like a pinata?

Authorities said Larry, a high school dropout with five young children fathered out of wedlock, has been a jet-setter, flying between Miami, New York and Las Vegas. He and Holloway also drove expensive cars and wore pricey clothes.

Just like James Bond, then.

 

Jana Luttenegger,  Deducting Clothing as a Business Expense:

Practically speaking, not many individuals can use the un-reimbursed clothing expense deduction. If your clothing expenses do qualify, in addition to providing receipts, be prepared to prove the apparel is not suitable for everyday wear.

Me,  Dress for success, but don’t look to the IRS for any fashion help.  My latest post at IowaBiz.com, the Des Moines Business Record blog for business professionals.

 

Brian Mahany,  Have A Government Security Clearance? Watch Out for IRS Tax Liens!

Paul Neiffer,  How Zero Equals $380.  How gambling losers can lose again at tax time under the new Obamacare Net Investment Income Tax.

Jim Maule, Deductions Require Evidence and a Bit of Care:

The first aspect of the case that caught my eye was the attempt of a tax return preparer to deduct a vacation as a business expense. She explained that she operated her tax return business from her home, and explained that “living in her neighborhood was stressful and that she felt harassed by her clients who would call her home at any hour.” Accordingly, she concluded that she needed to travel “just to get rest so that . . . [she] could function.” The Court, not surprisingly, denied the deduction, characterizing the cost of the vacation as a personal expense.

Peter Reilly, Musician Wins Hobby Loss Case   Peter covers the Gullion case that I covered last month, but he went further by contacting the victorious taxpayer, getting a perspective that you can’t get from reading the Tax Court opinion.

 

Linda Beale,  Beanie Baby creator to pay more than $50 million for offshore accounts

TaxProf,  The IRS Scandal, Day 138

Kay Bell, Dolce & Gabbana use their tax troubles as fashion inspiration

Jack Townsend,  Schedule UTP and Criminal Penalties. “Moreover, in almost all cases in which such behavior would be material, a knowingly incomplete or missing Schedule UTP could be used in support of the various penalties that might apply to the related underreported taxes — the 75 % civil fraud penalty and the accuracy related penalties.”

Jeremy Scott, Sun Capital Might Be Bigger Than You Think (Tax Analysts Blog)

Tax Justice Blog, When Congress Turns to Tax Reform, It Should Set These Goals.  Not necessarily my goals.

Andrew Lundeen, Elimination of State and Local Tax Deduction Possible (Tax Policy Blog)

Clint Stretch, Shopping for Tax Reform (Tax Analysts Blog)

 

It’s Tuesday, so it’s a Buzz-day for Robert D. Flach!

 

Quotable:

Perhaps if people with low incomes made really good decisions about how to spend their money, then poverty would be near zero. However, over the course of their lifetimes, many people make many bad decisions, and as a result they will spend a lot of time dealing with financial adversity. The moral and practical implications of this view of poverty are not as clearcut as either a progressive or a conservative would like.

Arnold Kling.

 

Career Corner: If You Can’t Admit You’ve Committed CPE Fraud, Then You Need to Take Another Ethics Course (Going Concern)

 

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Tax Roundup, 8/30/2013: Same-sex joint return frenzy edition.

Friday, August 30th, 2013 by Joe Kristan

Wed in Iowa, still married in Utah.  The IRS yesterday announced that same-sex couples married legally in any state will be treated as married for tax purposes, even if they reside in a state that does not recognize same-sex marriages.

The IRS also announced that couples that married in earlier years may amend their tax returns to claim joint filing status for open married tax years.  However, they will not be required to.  Couples who extended their 2009 returns have until October 15, 2013 to file amended 2009 returns.  Otherwise, 2010 is the earliest possible open year.

The announcement cuts both ways.  If the IRS says you are married, you no longer have the option of filing as a single taxpayer.  Many couples find that marital bliss comes at a tax price.  This chart from the Tax Foundation illustrates income situations where marriage can be more costly than single status:

Marriage penalty

The opportunity for same-sex couples to choose between single and joint status for open years is unique.   This only goes one way, though; joint filers cannot amend their open years to file as single taxpayers.

Couples who have legal status short of marriage, such as “registered domestic partners” recognized in some states, are not considered married by the IRS.

Other IRS releases on the issue:

Rev. Rul. 2013-17

Frequently Asked Questions For Legally Married Same-Sex Couples  and For Registered Domestic Partners, Civil Unions

Lot’s of coverage of this in the tax blog world.  Iowa’s own Jason Dinesen has long owned this issue, and he comes through with BREAKING: IRS Releases Guidance on Same-Sex Marriage The IRS’s DOMA Guidance: How are Iowa Returns Affected?What if One Spouse in a Same-Sex Marriage Hasn’t Filed Yet? and Will Same-Sex Married Couples Be Required to Amend? 

The Tax Policy Blog has also flooded the zone:

Elizabeth Malm,  Same-Sex Marriages Recognized for Federal Tax Purposes – What Does it Mean for the States?

Nick Kasprak, State of Celebration and Marriage Penalties and Bonuses (Families with Children Edition)

Other coverage:

TaxProf, IRS Recognizes Same-Sex Marriage, Regardless of State

Kay Bell, IRS grants same-sex married couples equal federal tax filing status regardless of where in the United States they live

Trish McIntire, The IRS and DOMA – part 1

Peter Reilly, IRS Recognizes All Marriages But Not Civil Unions

TaxGrrrl, IRS Rules All Legal Same Sex Marriages Will Be Recognized For Federal Tax Purposes   

Tax Trials, IRS Recognizes Same-Sex Marriages in All States

Althouse, “All Legal Same-Sex Marriages Will Be Recognized for Federal Tax Purposes.”

Going Concern, IRS to Recognize All Same-sex Marriages, Regardless of Resident State

Linda Beale,  Same-Sex Married Couples Will be Recognized for Federal Tax Purposes Even When Moving to Nonrecognition State

The Iowa angle: IRS will recognize marriage of same-sex Iowa couples (Des Moines Register)

 

There is a little other news today:

43 percent is the new 47 percent.  And Now for the Movie: Fewer Americans Pay No Federal Income Tax (Roberton Williams, TaxVox):

The percentage of Americans who pay no federal income tax is falling, thanks to an improving economy and the expiration of temporary Great Recession-era tax cuts. In 2009, the Tax Policy Center estimated that 47 percent of households paid no federal income tax. This year, just 43 percent will avoid the tax.
That is good news, as far as it goes.  It’s not healthy to have only a minority paying income tax, the primary funding source for big government.  It’s too tempting to order a double when someone else is picking up the tab.   Mr. Williams thinks that we should count payroll taxes like income taxes, but I agree with Robert D. Flach that they’re not the same thing.

 

Tony Nitti, Tax Aspects Of The NFL Settlement Payments  ”Well, if you’re a retired NFL football player, the Blue Book value has been set: your cognitive capacity is worth a cool $150,000.”

Andrew Lundeen,  Why Eliminating Taxes on Capital Would Be Good for Workers (Tax Policy Blog)

Jack Townsend, Another Israeli Bank Depositor Plea to Conspiracy

Robert D. Flach tops off a heroic week with a third Buzz!

 

Perhaps this isn’t the best way to handle an IRS exam.  Tax Analysts reports ($link) on a taxpayer who alleged that an IRS agent coerced him into sex:

Burroughs had sex with Abrahamson in September 2011 when she arrived at his home “provocatively attired,” according to the suit. U.S. Magistrate Judge Thomas Coffin concluded in the July 31 decision that Abrahamson was not acting in her official capacity, because the encounter occurred at Burroughs’s home during nonwork hours and “not in respect to the performance of official duties of the federal employee.”

One survivor of an IRS exam told me that she felt the least the IRS owed her for the experience was drinks and dinner.

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Tax Roundup, 8/29/2013: Individual mandate regs go final. And: the office velociraptor!

Thursday, August 29th, 2013 by Joe Kristan

20121120-2Avik Roy,  White House Publishes Final Regulations For Obamacare’s Individual Mandate — Seven Things You Need To Know.  Key points:

You pay a fine if your spouse and kids are uninsured.

If you claim dependents on your tax return, you’re responsible for paying the mandate fines if your dependents don’t have health insurance.

This provision takes on special importance because of its interaction with Obamacare’s employer mandate. Under the health law, employers with more than 50 full-time-equivalent workers are required to offer health coverage to their employees and employees’ dependents under the age of 26. Employers are not required to offer coverage to employees’ spouses. Hence, a worker who gets coverage through his job will be forced, under the individual mandate, to purchase coverage on his own for his spouse, if he or she doesn’t have other sources of coverage. A worker who doesn’t get coverage through his job will need to purchase coverage not only for himself, but also his dependents.

But all is not lost:

The IRS can’t go after you if you don’t pay the fine.

Basically, the only thing the IRS can do to make you pay the mandate fine is to withhold it from your tax refund, if you’re due one. So if you carefully calibrate your withholdings, such that you aren’t due a refund at the end of the year, the IRS has no way to collect the mandate fine.

That is, until you overpay some year, or they change the rules.

Related: Health Care Act And The Road To Good Intentions  A guest post by Scott Lovingood at TaxGrrrl’s place.

Also: Ask The Taxgirl: Taxing Health Care Benefits   

 

TaxProf,  Seventh Circuit Joins Majority of Circuits in Upholding Valuation Misstatement Penalties in DAD Tax Shelter.  The “distressed asset debt” shelter would purportedly allow people who needed tax losses to get them by acquiring interests in partnerships with worthless South American consumer debt, using pretend basis from notes.  Judge Posner found it unconvincing:

The intention was simply to create the appearance that the investors’ interest in the partnership had a high enough basis to enable the entire built-in loss that the shelter investors had acquired to be offset against their taxable income. But all this means is that the investors should not have been permitted to deduct their entire built-in loss — yet in fact they shouldn’t have been permitted to deduct any part of it, because the partnership was a sham.

The DADs were among the least plausible of the mass-marketed shelters, and that’s saying something.

Cite: Superior Trading LLC, CA-7, No. 12-3367.

 

Phil Hodgen,  Green card received in 2007? Expatriate in 2013 or else.  Give us your huddled masses.  We’ll fix them!

20130607-2Sometimes the author and the story are made for one another.  Roche: Taxation of Medical Marijuana Businesses (TaxProf).  The story explains why the tax law isn’t kind to these folks:

Section 280E represents a departure from the longstanding practice of generally taxing illegal businesses in the same manner as legal businesses and effectively causes medical marijuana businesses to be taxed on their gross income rather than their net income. Medical marijuana businesses are, however, allowed to reduce their gross revenue by cost of goods sold in arriving at gross income. This puts medical marijuana businesses in the unusual position of wanting to capitalize as many of their otherwise deductible expenses to inventory as possible, unlike most businesses, which would prefer a current deduction.

It would be interesting to see an IRS exam where they want you to capitalize less to inventory.

 

Paul Neiffer, What’s my tax on selling equipment?  If it’s a gain, usually it’s ordinary income.

William Perez,  2012 Corporate Returns Due September 16.  Also, extended 1041s and 1065s.

 

Jack Townsend, Switzerland Reportedly Strikes Deal with U.S. for the “Other” Banks; Implications for U.S. Depositors.

Linda Beale, Swiss and US Apparently Reach Deal on Bank Disclosures related to Tax Evasion

 

Bounty hunting in Pennsylvania?  Philadelphia’s Use of Contingent Fee Auditors (Cara Griffith, Tax Analysts Blog)

 

I’m late to the new Cavalcade of Risk at My Personal Finance Journey.  Lots of good risk management items, including Hank Stern’s The Down Syndrome Conundrum.

What this country needs… What We Need Is a Godless Tax Code! (Christopher Bergin, Tax Analysts Blog)  Doesn’t Satanic count?

Kay Bell, State taxes, assorted fuel fees, drive up cost of a gallon of gas

 

Peter Reilly,   Tea Party Patriots Inc And IRS – Who Is Being Unreasonable ?  Peter seems to think that the IRS wasn’t clearly unreasonable in holding up Tea Party applications.  I think he misses the point — the whole process was one-sided.  Only right-side groups got the IRS slow-walk, while “progressive” applications skated through;

7-30-13-irs-targeting-statistics-of-files-produced-by-irs-through-july-29-2-Peter is right, though, when he says “We Really Should Not Have Accountants Trying To Figure This Stuff Out.”  John Kass explains how this stuff works in IRS scandal a reminder of how I learned about The Chicago Way

 

Career Advice: Would I Recommend the Tax Prep Industry to a Young Person? Probably Not  (Jason Dinesen:

Going Concern, Let’s Play Another Round of Accountant/Not an Accountant!  I found the first one too frightening to continue.

 

Finally - if you think you’ve had a bad day at the office, it could have been worse:

(via Lynnley Browning’s Twitter feed)

 

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Tax Roundup, 8/1/2013: Sales tax holiday! And bidding for tax trouble.

Thursday, August 1st, 2013 by Joe Kristan

 

Flickr image courtisey gaudiramane under Creative Commons license

Flickr image courtesy gaudiramane under Creative Commons license

Iowa sales tax holiday!  The silly Iowa sales tax holiday for clothes is tomorrow and Saturday.  From the Iowa Department of Revenue website:

  • Exemption period: from 12:01 a.m., August 2, 2013, through midnight, August 3, 2013.
  • No sales tax, including local option sales tax, will be collected on sales of an article of clothing or footwear having a selling price less than $100.00.
  • The exemption does not apply in any way to the price of an item selling for $100.00 or more
  • The exemption applies to each article priced under $100.00 regardless of how many items are sold on the same invoice to a customer

While it is touted as a “back to school” holiday, there is no classroom requirement.

Sales tax holidays are silly gimmicks and bad tax policy.  Yet if you are a careful shopper, you can save on a new outfit in Iowa and take it to Louisiana for their September 6-8 sales tax holiday on firearms.

Links:

Cara Griffith, Back-to-School! Time for a Holiday (Tax Analysts blog)

Kay Bell, 12 states have sales tax holidays this weekend

Details on Iowa’s sales tax holiday

Map of U.S sales tax holidays.

 

Going, going, gone.  An Iowa auctioneer was sentenced to 48 months in prison this week after pleading guildy to tax fraud and social security fraud, reports WOWT.com:

Fifty-five-year-old Robert Duncan was sentenced by U.S. District court judge John Jarvey after entering a guilty plea. That plea came back in March.

Duncan admitted to defrauding the SSA, filing a false income tax return and making a false statement to a financial institution.

The former owner and auctioneer for Bob Duncan and Associates, was also ordered to pay restitution to the Social Security Administration in the amount of $218,755.10, and to the Internal Revenue Service in the amount of $42,254.00.

Not good.

 

The IRS did nothing wrong, and besides they did it to lefties too!  That has been one line of argument by the “nothing to see here” folks who pooh-pooh the IRS harassment of Tea Party groups.   Now NPR, not known as a friend of the Tea Party, has run the numbers, and it looks like… the IRS harassed conservative outfits, and pretty much left the left side alone:

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Nothing to see here, move along…  For example, Ways and Means–still distracting with false scandals (Linda Beale).

Other coverage:

TaxProf, The IRS Scandal, Day 84.

Sioux City Journal, Iowa-based group at center of new IRS accusations

 

Tax Justice Blog, What the President Really Said about Business Tax Reform:

What the President just proposed is not much different from his previous proposals.

That’s the problem.

William McBride, Obama’s Grand Bargain a Roundabout Way to Raise Corporate Taxes (Tax Policy Blog)

William Perez, Some Senators Release Their Blank Slate Tax Reform Ideas

Jim Maule,  Polishing Subchapter K: Part I.  Prof. Maule has some ideas for partnership taxation.

 

Tax Trials, Tax Court Reasserts Position on Conservation Easements

Missouri Tax Guy, Business Structures, Choosing your Entity

                                                              

Peter Reilly, North Carolina Declares Cash Register Zappers Contraband .  The government doesn’t like skimming software.

Robert D. Flach has some thoughts on THE IRS AND NJDOT WEBSITES

 

Tony Nitti, MLB Trade Deadline Winners And Losers: The Tax Edition.  Through no fault of his own, Bud Norris goes from income tax-free Texas to high-tax Maryland.  On the positive side, he won’t be playing for the Astros any more.

Tracy Gordon, Detroit’s Pension Blues, and America’s (TaxVox)  Defined benefit pensions for public employees should be outlawed, and their assets converted to defined contribution plans.

The Critical Question: Were ‘Real Housewives’ Stars Targeted For Prosecution Because Of Their Celebrity?  (TaxGrrrl).  If you are going to cheat on your taxes, it may be wise to not put your life on television.

 

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Tax Roundup, 7/29/2013: If the embezzler had used the money for figurines, would they sue Precious Moments?

Monday, July 29th, 2013 by Joe Kristan

20130729-1Blame the casino for the thief?  A Nebraska business may be taking an oddly-forgiving view towards employee theft.  The Associated Press reports that the Colombo Candy and Tobacco Wholesale Company (now there’s a product combo for everyone) declined to press charges against a former employee for allegedly stealing $4.1 million.  Instead they are suing a Casino for leading her unto temptation.

But the Nebraska Department of Revenue is less willing to let bygones be bygones, reports KETV.com:

The Nebraska Department of Revenue and the Sarpy County attorney have decided to pursue criminal charges against 54-year-old Caroline Richardson of Gretna.

Sarpy County Attorney Lee Polikov said this is a case he doesn’t see every day.

“I think it’s interesting for people to know that stolen money is considered income and has to be reported on your income tax,” Polikov said.  “If you don’t report it and don’t pay it, you’ll be prosecuted for it.”

In a civil filing where Richardson is identified as “Jane Doe,” Colombo Candy argued the blame should be less on Richardson and more on an Iowa Casino.

A more cynical view would be that the candy company knows that the accused thief has no money, so it’s going for the deep pockets.

 

Paul Neiffer, Help Prevent SE tax on CRP Rents!  Paul wants CRP recipients to help fund an appeal of the recent Tax Court Morehouse case, holding CRP income to be self-employment income.

The Morehouse case needs be appealed because the case sets a bad precedent for all owners of CRP across the country. Anyone who fails to treat CRP as self-employment income is subject to penalty for underpayment of Federal tax.

However, appeals cost money, and the dollars at risk for Morehouse personally (only $6,000) just aren’t enough for him to justify paying for the appeal. It is important enough that I want to spread the word, and request my readers who have ground in CRP to share in the cost.

If you have CRP ground and want to help the cause, Paul tells you how.

 

TaxGrrrl, Bolt Strikes At Diamond League Games, Says UK Races Hinge On Tax Laws 

Usain Bolt said he wouldn’t race in the U.K. after the Olympics unless they changed their tax laws… and they did, extending the laws in place for the Olympics for the Diamond Games.

Tough luck if you aren’t famous, I guess.

 

Phil Hodgen is launching Web-Based Seminar: U.S. Tax Solutions for Non-Filers Abroad.  It looks like a great resource for the innocents abroad caught up in the FBAR fiasco.

 

Jack Townsend,  Must a Defendant Prove Innocence of Uncharged Crime to Reverse Wrongful Conviction?  That’s insane.

TaxProf, The IRS Scandal, Day 81.  They’ll keep calling it a “phoney” scandal, but the Inspector General still says otherwise.  So did the President, until it became awkward.

Instapundit:

JACK LEW:  There’s No IRS Scandal, But I Won’t Say Whether I Talked To Wilkins About Targeting.

Those who keep saying there’s no scandal here need to acknowledge that the IRS admitted targeting conservative groups months ago.

 

Kay Bell, Scholarships and grants get better grades than borrowing and tax breaks as ways to pay college costs

William Perez, IRS Update for July 26, 2013

 

Joseph Henchman, Massachusetts to Have Second Highest Cigarette Tax, Rare Tax on Computer Services, Higher Gas Tax (Tax Policy Blog)

Brian Strahle, RECENT CALIFORNIA LLC FEE ISSUES AND WARNING FOR NONFILERS:  HERE COMES THE NOTICE!!  California is looking for nickels under your sofa cushions.

 

Christopher Bergin, Our Secretive Senate. (Tax Analysts Blog).  Not a fan of the 50-year memory hole for tax reform ideas.

Peter Reilly, Why Tax Reform Is Impossible

 

Jim Maule, Tax Law and National Defense: Hush Now!

Linda Beale, Proposals for Cutting the IRS Budget.

 

Janet Novack, U.S. Seeks PNC, Wells Fargo, JP Morgan Records To Find Tax Cheats–From Norway   Look out, Decorah.

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Tax Roundup, 7/9/2013: IRS identity-theft assistance edition.

Tuesday, July 9th, 2013 by Joe Kristan

20130419-1Social Security numbers make the world of identity theft tax fraud go around.  Grifters get them from published lists of dead taxpayers, from stolen medical records — anywhere they can.  They use them to steal untold billions from the IRS while creating tax nightmares for the real owners of the numbers.

And the IRS is here to help!

Public.Resource.Org has discovered that the Internal Revenue Service has posted the Social Security Numbers of tens of thousands of Americans on government web sites. The database in question contains the filings of Section 527 political organizations such as campaign committees. This Section 527 database is an essential tool used by journalists, watchdog groups, congressional staffers, and citizens. While the public posting of this database serves a vital public purpose (and this database must be restored as quickly as possible), the failure to remove individual Social Security Numbers is an extraordinarily reckless act.

What does the IRS have to say for itself?  Tax Analysts reports ($link):

     The IRS said that the Service is required to disclose approved exemption applications and information returns, and advises groups to not include SSNs on those forms or attachments. According to a statement dated December 19, 2012, on the IRS website, “By law, with limited exceptions, the IRS has no authority to remove that information before making the forms publicly available. Documents subject to disclosure include attachments filed with the form and correspondence with the IRS about the filing.”

     Malamud (Carl Malamud of Public.Resource.Org) said that he disagreed with the IRS position that it could not redact the SSNs and that it ran counter to privacy laws and federal guidance protecting the disclosure of personal information.

This level of competence and restraint really makes me want the IRS to regulate preparers more.  Oh, and to run the health care system, too.

(Hat tip to Twitterite @kermalou)
Nothing to see here, move along.   IRS supporters 0-for-3 on putting scandal to rest (Daily Caller)

Since it was revealed in May that the Internal Revenue Service (IRS) improperly targeted the tax-exempt nonprofit status of conservative groups between 2010 and 2012, defenders of the beleaguered agency have offered three broad attempts to suppress the growing IRS scandal and put the matter to rest. However, each of these three attempts failed outright, and the scandal continues, with tenacious investigations underway by the House Oversight Committee and House Ways and Means Committee.

Sorry, Linda.  (via Instapundit)

 

 

 

Martin Sullivan, Effective Corporate Rate 13 Percent? (Tax Analysts Blog):

Putting all this together it seems reasonable to not revise the general consensus view that worldwide effective corporate tax rates are on-average in the mid-twenties when we are not in the throes of a recession. Moreover, it is important to remember that these broad averages hide a lot of interesting detail. Multinationals in the oil and mining businesses generally pay very high rates. Purely domestic firms generally have an effective rate close to 35 percent. And pharmaceutical and tech companies generally have effective rates much lower than average.

But I thought corporations “never had it so good“!

 

Jeremy Scott, Summers Pushes for Tax Break on Foreign Profits (Tax Analysts Blog)

Jack Townsend, Swiss Court Ruling in Credit Suisse Case.  “The Swiss Federal Supreme Court has ruled, here, that the U.S. “group requests” under the treaty exchange of information provision are permissible if the request includes enough detail to establish grounds for suspicion of tax fraud and the like.”

Donald Marron, Smart Tax Reform Could Shrink the Government (TaxVox).  If it doesn’t, it’s not very smart.






It’s Tuesday, so let’s Buzz with Robert D. Flach!


News you can use.  How Not to Commit Tax Evasion (Russ Fox)

 

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Tax Roundup, 7/3/2013: Effective rate edition. And Pickett’s Charge!

Wednesday, July 3rd, 2013 by Joe Kristan

gao-logoA GAO study of effective tax rates has created some comment in the tax policy blog world.  For example, Howard Gleckman,  Large U.S. Firms Paid a 16.6 Percent Federal Tax Rate (TaxVox):

A new analysis by the Government Accountability Office finds that in 2010 large U.S. corporations paid an average effective tax rate on their worldwide income of 22.7 percent and U.S. federal tax of only about 16.6 percent.  The federal rate was less than half of the 35 percent statutory rate.

Large firms that made a profit that year paid an even lower effective rate—an average of 16.9 percent in worldwide taxes and only 12.6 percent in U.S. federal tax.

The always moderate and restrained Linda Beale chimes in with Corporations Never Had It So Good.

William McBride from the Tax Policy Blog doesn’t see it quite that way in GAO Compares Apples to Oranges to Find Low Corporate Effective Tax Rate:

A new study by the Government Accountability Office (GAO) claims the corporate effective tax rate (ETR) was 12.6 percent in 2010, which is about half the standard estimate found in other studies cited by the GAO and summarized here, here, and here. Based on IRS data, the corporate effective tax rate is about 26 percent  on average, though it dropped in the most recent year of data, 2009, to a little over 22 percent, due to the recession and temporary tax incentives meant to stimulate investment.

Why the difference?

So how did GAO come up with such a low effective tax rate? Mainly by comparing apples and oranges. Particularly, GAO takes the smallest measure of taxes paid and divides it by the largest measure of net income according to financial statements, even though this net income is not the tax base that the corporate tax was meant to apply to. The corporate tax rate applies to taxable income, as defined in the tax code. According to GAO, taxable income in 2010 was $863 billion for profitable corporations, while financial statement income was $1.443 trillion.

It’s true that effective rates on taxable income will never be as high as the stated rate because of tax credits, but the GAO numbers show a misleadingly low burden.

 

The Obamacare employer mandate has been delayed.  My coverage and a roundup: Don’t fire employee #50 just yet: Obamacare employer mandate delayed until 2015

 

Jason Dinesen, Do Iowa Taxes Change as a Result of the DOMA Ruling?  ”The answer is: very little changes on Iowa taxes.”

Trish McIntire, DOMA is Dead

 

Joseph Thorndike, Milton Friedman Didn’t Believe in Tax Reform (Tax Analysts Blog).  Getting rid of loopholes, the argument goes, just makes room for new ones.

TaxProf, The IRS Scandal, Day 55 and IRS Hits Tyco With $1 Billion Tax Bill

Janet Novack, IRS Calls Foul Against Estate Of Late Minnesota Twins Owner Carl Pohlad.   “Carl Pohlad’s heirs contend his stake in the MLB club was worth just $24 million. The IRS pegs it at more than 12 times that.”

Zerjav update:  I have updated my post on the St. Louis tax advisor who was sentenced to 18 months in prison to include information from a U.S. Attorneys press release on the details of how the evasion was done.

David Brunori, Cuccinelli’s Corporate Tax Plan Does Not Go Far Enough (Tax Analysts Blog:

The state would be far better off repealing the tax and either 1) reducing spending by $800 million, or 2) finding other sources of revenue. An increase in the personal income or sales tax would be a better idea than trying to tax corporate income.

Amen.

 

Tax Justice Blog, Bad Budgets Become Law in Ohio and Wisconsin.  That probably means the opposite.

Peter Reilly continues to report breaking news from the Battle of Gettysburg:  Did Doris Kearns Goodwin Blow It At Gettysburg ?  I am insanely jealous.  I assume he will torture me with coverage of today’s 150th anniversary of Pickett’s charge.

 

News you can use. The Screaming at EY Has Stopped (Going Concern)

I don’t see what his orientation has do with anything.  Century old barn may’ve been started on fire by flaming raccoon (Radio Iowa)

 

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Tax Roundup, 6/28/2013: Not dead yet edition

Friday, June 28th, 2013 by Joe Kristan

20120928-2Thought the IRS scandal was dead? IRS Inspector Firm on One-Sided Targeting; Small Number Faced Extra Scrutiny, While All Tea-Party Applications Were Reviewed (Wall Street Journal):

Internal Revenue Service employees flagged for extra scrutiny fewer than a third of progressive groups applying for tax exemptions from mid-2010 through mid-2012, compared with 100% of conservative applicants, an IRS inspector general said.

The new data, released in a letter to Democratic lawmakers that was dated Wednesday, appear to support Republicans’ contention that conservative groups were subjected to more IRS scrutiny, and undercut Democrats’ case that the IRS treated left-leaning and right-leaning groups similarly.

Just saying it’s over doesn’t make it so.

TaxProf, The IRS Scandal, Day 50

Christopher Bergin, Get to the Bottom of It  (Tax Analysts Blog)

Clearly, there is a problem at the IRS, a serious one. And that does not just apply to exempt organizations, which, frankly, have always been the third rail of national tax administration. What’s going on is not funny or entertaining. What’s going on means the country is in trouble.

While I am more easily entertained then Christopher, I agree with his conclusion.

David Cay Johnston, Revelations Show Lois Lerner Blew It  (Tax Analysts Blog)

 

Linda Beale isn’t on board with the IRS “apology payment” plan floated by the Taxpayer Advocate:

This seems to me to be a very very bad idea.  Creating payments for jobs not perfectly done implies a perfection that simply isn’t achievable in large institutions with multi-faceted functions.

OK, fine — but if it’s not achievable for a giant institution with enormous resources and all the time in the world, maybe it’s not achievable for small institutions with with “multi-faceted functions” and far fewer resources under severe time constraints — like your average business or your local Tea Party run by activists in their free time.  Maybe the IRS shouldn’t so routinely assert penalties on audit deficiencies.  Until they stop, though, I say sauce for the goose, sauce for the gander.

 

Remember when the state-run Iowa Cable Network was going to make Iowa the cutting edge tech state?  Iowa tries to sell ICN, but gets bids from only one prospect (Thegazette.com, via Gongol)

 

More DOMA demise fallout

William Perez, Tax Issues of the Supreme Court Ruling that DOMA is Unconstitutional

Margaret Van Houten, Tax Implications of DOMA Ruling   (Davis Brown Tax Law Blog)

Peter Reilly, DOMA Decision May Affect Civil Unions

Tax Justice Blog, What Are the Tax Implications of the Supreme Court Ruling on Marriage Equality?

 

In other news…

Trish McIntire, Amortizing Your Life:

I get asked occasionally if a client can take the value of their time as a deduction. They’ve done the repairs on a rental house themselves and they want to deduct what they would have paid someone else to do it or they have worked for a charity and would like to use their time as a charitable deduction. Of course, the value of one’s time is not deductible. 

Philip Hammersley, Elizabeth Malm, Pennsylvania’s Family Business Death Tax on Life Support (Tax Policy Blog)

Howard Gleckman,  Can The Baucus-Hatch Blank Slate Plan Jump Start Tax Reform?  (TaxVox)

TaxGrrrl, What Back Taxes? Senate Passes Immigration Reform Bill, Goes Easy On Tax Repayment

Robert D. Flach is ready with your Friday Buzz!

 

Going Concern, Oregon Department of Revenue Sensitive to the Fact That Some Religious Groups Think Filing Tax Forms Electronically Is of the Devil.  There are days when I think that’s right if you leave the word “Electronically” out.

 

It looks like I have to update my blogroll for Megan McArdle for what — the fifth time?  But Megan was one of the first economics bloggers, and she’s well worth following to her new blog home.

 

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Tax Roundup, 6/27/2013: All apologies edition. And DOMA Carnival!

Thursday, June 27th, 2013 by Joe Kristan

 

Taxpayer Advocate Nina Olsen

Taxpayer Advocate Nina Olsen

Apology payments? The Taxpayer Advocate’s office issued a special report yesterday blasting the IRS treatment of 501(c)(4) exemption applications.  The report also said the IRS apparently violated the law, and its own internal procedures, by having unpublished secret internal guidance on handling the Tea Party cases.The report raises the idea of allowing the issuance of $1,000 “apology payments” for taxpayers who are mistreated by the IRS.

Not a bad start, but far better would be a “sauce for the gander” approach, where the IRS could be subject to penalties for late processing, delays and unjustified positions on the same basis as taxpayers.  If a little charity can be hit with a $100-per-day penalty for not filing a Form 990, the IRS could pay $100 per day for sitting on a 501(c)(4) exemption.  If the IRS takes an unsupported position on an examination, it should pay to the taxpayer 20% of the tax it would have collected through its bogus position.

The TaxProf has more.

Joseph Thorndike, So the IRS Hounded Liberals Too – But We’ve Still Got a Problem (Tax Analysts Blog) I still await tales left-side organization applications left to languish for years or subjected to the grilling applied to the Tea Party groups.

 

Lots of reaction to yesterday’s Supreme Court decision striking down the Defense of Marriage Act. 

Jason Dinesen owns this issue.  He has an extensive practice in Iowa same-sex married couples, and he posted up a storm yesterday:

DOMA Ruled Unconstitutional:

It means couples in same-sex marriages no longer have to jump through the following hoops to meet their tax obligations:

  1. Prepare and file separate federal tax returns as two single people and applying tax law as it applies to single people.

  2. Prepare a “mock” federal return employing tax law as it applies to married people, to see what their tax situation would have looked like if the federal government had recognized their marriage.

  3. Use that “mock” return to prepare their state return as a married couple.

Also, DOMA Done, But Complications Live On and More DOMA Musings — Married But Living in a Non-Recognition State:

IRS Revenue Ruling 58-66 says marital status is determined at the state level and does not change even if you move to a state that doesn’t recognize your marriage… But would this Revenue Ruling from 1958 regarding common-law marriage apply to same-sex couples from states like Missouri or Nebraska who drive to Iowa to get a marriage certificate but who actually live in Missouri or Nebraska, or some other non-recognition state?

The IRS will have to come out with guidance on this and other issues, including:

- A standard procedure for amended returns from same-sex couples who want to obtain joint filing benefits.

- Guidance on the mandatory nature of joint returns for same-sex married couples, and whether it is retroactive.  If same-sex married couples get to choose for open years whether to file jointly or single, is it also an equal-protection violation to deny that choice to double-sex couples?  I doubt it, but that would be fun.

Jason also offers a DOMA Tax News Roundup today.

 

Tony Nitti, Tax Implications Of The Supreme Court’s DOMA Decision: Same-Sex Couples To Be Subject To Marriage Penalty:

The Supreme Court’s ruling is clearly a victory for equality. And from a tax perspective, the decision stands to save meaningful dollars for same-sex couples who will now be defined as married for purposes of the federal estate and gift laws; because the marital deduction will now apply to these couples, spouses will be permitted to transfer assets to each other tax-free during their lifetime or at death.

Kay Bell, DOMA is dead: The effect on same-sex married couples’ taxes

Len Burman, What Will Supreme Court Decision on DOMA Mean for the IRS? (TaxVox)

Let’s assume that half of the newly recognized couples receive bonuses, which means that roughly 50,000 couples might benefit from filing amended income tax returns for 2012, 2011, and/or 2010. If all 50,000 filed amended returns for an average of 1.5 years out of the three this would yield 75,000 amended returns.

Roberton Williams, DOMA’s Demise and Federal Taxes (TaxVox)

Russ Fox, DOMA Done, But Don’t File that Joint Return Just Yet:

The US Supreme Court ruled today that the federal Defense of Marriage Act (DOMA) was unconstitutional.  That makes it appear that same-sex couples should be able to file joint tax returns.  There’s only one problem: The IRS computers likely would reject such a return if it were filed today.

TaxGrrrl, Supreme Court Rules DOMA Unconstitutional (And It Was A Tax Case!)

Nick Kasprak, Joint Filing in the Tax Code (Tax Policy Blog):

Despite the possibility of a penalty, joint tax returns generally provide tax relief, and they’re probably one of the biggest benefits that gay couples can now take advantage of (along with the estate tax exemption, which was at the center of the Supreme Court case).

Joseph Henchman, Supreme Court Decides Same-Sex Marriage Estate Tax Case (Tax Policy Blog)

Robert D. Flach, THE DEATH OF DOMA

Tax Trials, DOMA Doomed by Estate Tax Refund Claim

Linda Beale, Gay Marriage Decisions– As Expected, A Step Towards Full Civil Rights for Gays

 

In other news:

Russ Fox, Loving Appeal to be Heard on September 24th

Jack Townsend, New Taxpayer Advocate Discussion of Problems with IRS OVDI/P Program.  Still shooting jaywalkers.

Paul Neiffer, A Lease Qualifies For Like Kind Treatment But Watch the Fine Print

William McBride, Reducing Tax Avoidance by Reducing Economic Activity: New Zealand’s Failed Experiment with Ending Deferral (Tax Policy Blog)

 

Extortion Watch.  Tennessee Man Indicted for Romney Tax Return Fraud and Extortion Scheme (Department of Justice Press Release)

Legal extortion watch.   Police investigate damage to red light camera.  (Des Moines Register) It’s a tragedy that somebody might have gotten away with not quite coming to a complete stop at an empty intersection.

 

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Tax Roundup, 6/25/2013: IRS says it was evil to lefties, too. And: RRTP > CPA?

Tuesday, June 25th, 2013 by Joe Kristan

20130419-1The IRS yesterday issued a new internal report showing that the hold-ups on Tea Party exemption applications continued until just now.  Tax Analysts reports ($link):

IRS Principal Deputy Commissioner Daniel Werfel told reporters that when he began his 30-day review of the agency’s mishandling of conservative groups’ exemption applications, he discovered that the exempt organizations unit was still using BOLO lists that included inappropriate or questionable criteria.

“BOLO” is “be on the lookout” lists looking for suspicious signs of political activity via the names of the organization.  These lists included “progressive” as a suspicious word, along with some right-side words, but it it appears that the left-side groups were not singled out for the “special” treatment accorded the Tea Party.

There is still a lot we don’t know about how the IRS treated the 501(c)(4) applications.  Unless we find out about left-side applications left to languish for years, like the Tea Party applications, it still doesn’t appear that IRS was evenhandedly evil.  And “they screwed some of us, too” isn’t exactly a ringing defense of the organization.

IRS, Charting a Path Forward at the IRS: Initial Assessment and Plan of Action

Kay Bell, IRS also was on the lookout for progressive tax-exempt groups

Linda Beale, To All Those Right-Wingers Complaining about IRS Targeting–guess what, they used “progressive” to help screen, too!

TaxProf, The IRS Scandal, Day 47

 

You can’t condition your conservation easement on it being deductible, says the Tax Court. (Graev, 140 T.C. No. 17).  $990,000 deduction fails.

Tony Nitti, Tax Court: Leasehold Interest Exchanged For Fee Interest In Real Estate Does Not Qualify For Section 1031 Treatment,  If your leasehold is less than 30 years, don’t expect it qualify in a swap for a fee interest in real estate.

Jana Luttenegger, Emergency Preparedness includes Safeguarding Records (Davis Brown Tax Law Blog).  “Have you thought about what records could be destroyed if a severe storm damaged your home or business?”

 

Tuesday Buzz from Robert D. FlachIt links to a new post on Robert’s “The Tax Professional” blog, where Robert asserts:

If a CPA were able to earn the designation of RTRP it would clearly identify that individual CPA as being competent and current in 1040 preparation.

False.  The now-dormant RTRP exam was a literacy test that proves tax competency in neither CPAs nor anyone else.  Robert is correct, though, when he says “A CPA is not automatically a 1040 expert, but a specific CPA may be a 1040 expert.”

I do think that CPAs who do tax work tend to be very capable, but so are many non-CPA preparers.  I think the competency curve would look something like this:

20110118-2.png

You should choose your tax preparer not just because of initials; you should find out what kind of work the preparer does.  And check references.

 

Russ Fox, FBAR Deadline Is Now.  If you haven’t sent in your FBAR, Russ shows how to e-file.

Austin John, Maryland Soon to Roll Out the Rain Tax (Tax Policy Blog)

Tax Justice Blog, Governor Cuomo, Meet Governor Brown.  “California Shows that Geographically Targeted Tax Incentives Don’t Work.”   Leave out “geographically” and it’s even better.

 

David Henderson, Atkinson and Krugman on Tax Rates (Econlog).

Jeremy Scott, Can the OECD Be Trusted on Base Erosion? (Tax Analysts)

TaxGrrrl, If It Ain’t About Money (Turns Out It Is): Rapper Fat Joe Headed To Prison For Failure To Pay Taxes

 

Breaking News from 2010:  Tax Return Fraud Spiraling Out of Control (Citizens Against Government Waste).  It’s ID theft fraud, of course.  Too bad Commissioner Shulman was busy regulating preparers and holding up 501(c)(4) applications.

Athletic ability has a weak correlation with financial ability.  Bankruptcy Rates Among Professional Athletes Need to Be Addressed (Jen Carrigan at Missouri Tax Guy)

 

 

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Tax Roundup, 6/4/2013: High School non-musical IRS scandal edition.

Tuesday, June 4th, 2013 by Joe Kristan
Lois Lerner, IRS, Class of 2013?

Lois Lerner, IRS, Class of 2013?

Sometimes life seems like high school continued.  One of my high school classmates apparently has an unpleasant history with a central figure in the IRS scandal.  Investors.com reports:

Perhaps not surprisingly, the IRS scandal may have its roots in Illinois politics with the 1996 targeting of Illinois conservative Al Salvi by a familiar name, Lois Lerner, then head of the Enforcement Division of the Federal Elections Commission.

That year, Democrat U.S. Rep. Dick Durbin and Republican State Rep. Al Salvi were locked in a battle for the U.S. Senate seat Durbin would eventually win.

As the journal Illinois Review details, Salvi was confronted with an “October surprise,” not one, but two, FEC complaints filed against him — one by Illinois Democrats about the way he reported a loan he made to himself, and another by the Democratic Senatorial Committee about a reported business donation.

Al Salvi, Carmel High School for Boys, Class of 1978

Al Salvi, Carmel High School for Boys, Class of 1978

Mr. Salvi says Ms. Lerner played hardball, reports Illinois Review, demanding that he promise to never run for office again if the FEC dropped their complaint:

During that call, Salvi said, he explained to Lerner exactly what happened — that while the loan to himself was legal, there may be a difference of opinion on how the loan was reported to the FEC. Salvi explained it was a simple matter and said he thought Lerner would suggest an agreeable solution and dismiss the Democratic National Committee’s complaint. 

But that was not Lerner’s reaction. Instead, that’s when she said to Salvi, “Promise me you’ll never run for office again, and we’ll drop the case.”

Salvi said he asked Lerner if she would be willing to put the offer into writing.

We don’t do things that way,” Salvi said Lerner replied.

Salvi queried how then could such an agreement be enforced.

According to Salvi, Lerner replied: “You’ll find out.”

A judge dismissed the FEC complaint after the election, which Mr. Salvi lost to Dick Durbin, who still holds the seat.

If the Salvi account holds up, it certainly doesn’t help the case that Ms. Lerner was just a dedicated civil servant trying to enforce Sec. 501(c)(4) impartially.  In any case, it’s clear just by the job she held at the FEC that she had to be aware of the politics involved in the Tea Party applications while employees under her supervision improperly targeted anti-administration groups.  She has stated that she tried to stop the targeting.

Disclosure: I have an electoral history with Al Salvi, but no FEC intervention was needed.

 

So-called Scandal Watch  There is a mini-backlash against the idea that there is anything scandalous about what the IRS did; Linda Beale and Iowa political commentator Ed Fallon are on that bandwagon.  Testimony yesterday by Russel George, Treasury Inspector General for Tax Administration, is relevant to the issue:

The IRS used inappropriate criteria that identified for review Tea Party  and other organizations applying for tax-exempt status based upon their names or policy positions instead of indications of potential political campaign intervention. Because of ineffective management by IRS officials: 1) inappropriate criteria were developed and stayed in place for a total of more than 18 months, 2) there were substantial delays in processing certain applications, and 3) unnecessary information requests were issued to the organizations.

That seems like plenty of scandal right there, even if the only villain is “ineffective management.”  The behavior towards the Tea Party groups is also consistent with effective but ill-intentioned management.

Martin Sullivan leans to the “no scandal here” school in More than 80% of “Tea Party” Applications Should Have Been Reviewed Anyway (Tax Analysts Blog).  That still doesn’t justify the intrusive nature of the questions asked or the extensive delays.  It’s also like saying it would be OK to, say, frisk everyone at a drug legalization rally, as long as many of them are found to be carrying dope.

 

TaxProf, The IRS Scandal, Day 26.

Kay Bell, IRS Acting Commissioner Daniel Werfel survives his first Capitol Hill hearing on troubled agency problems

Jeremy Scott, IRS Missteps Will Hurt Tax Administration (Tax Analysts Blog): “As sympathetic as the IRS can seem on one hand, its absurd expenditures on conferences and training videos, along with the appearance of political bias resulting from the exempt organization scandal, have made it almost inconceivable that it will receive more funding anytime soon.”

Clint Stretch, The IRS Exempt Org Debacle: An Easy Fix (Tax Analysts Blog): “Anyone who wants to form a social welfare organization should be allowed to do it.”

Patrick Temple-West,  Republican donors drew IRS scrutiny, and more.  Related Tax Update coverage: Can political contributions really be taxable gifts?

Linda Beale, Another False Media-Generated IRS “Scandal”

 

Jim Maule, Does a Mandatory Compensation Deduction Reduction Make a Credit Mandatory?

Fiduciary Income Tax Blog, Are Self-Settled Special Needs Trusts on the Horizon?

It’s Tuesday, so Robert D. Flach has your Buzz!  Meanwhile, Kay Bell posts Tax Carnival #117: Summer Tax Time

 

Breaking: The Donut Sandwich Is Here, So…Are Weight-Loss Costs Tax Deductible?  (Tony Nitti).

 

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Tax Roundup, 5/30/2013: Galt’s Gulch, NY? And: taxes are unconstitutional, but refunds are just great!

Thursday, May 30th, 2013 by Joe Kristan

20130530-2David Brunori, Worst Tax Idea of the Year? Cuomo Wins by a Landslide:

An ideal tax system is based on a broad base and low rates. At least that is what the thinking folks believe. An ideal tax system also treats similarly situated people and organizations the same. People concerned about fairness have always thought that. And an ideal tax system minimizes economic distortions. Now politicians of every stripe violate that ideal every day. Personally, I think politicians violate this idea because 1) they arrogantly want to dictate their views on the rest of us, or 2) they want to enrich their friends.

Now the Governor of New York wants to create tax-free zones:

Not everything, everyone, or everywhere in New York will be tax-free. The tax-free communities will be all of the state universities (and curiously a number of private universities) outside New York City. Companies that open shop in these communities will be exempt from sales, income, and property taxes. That’s better than living in New Hampshire. Better still, employees who work for businesses in the new tax free communities will be exempt from paying state income taxes.
So if you are in the community you don’t pay tax. If you are outside, even by six inches, you do.

I agree that this is a terrible idea, as is.  But if Governor Coumo is willing to go further and create libertarian free cities in his state, that would be pretty cool.  Galt’s Gulch, NY could give the Free State Project in neighboring New Hampshire a run for its money.

 

William McBride, CBO: Tax Expenditures in the Eye of the Beholder.  With this handy chart:

 20130530-1

 

 

TaxProf, The IRS Scandal, Day 21

Russ Fox, The Big Questions Remain Unanswered (IRS Scandal Update):

 Why did the IRS scrutinize “conservative” and “tea party” applications?  It’s clear the orders came from Washington.  Who ordered it?  The IRS employees in Cincinnati were most likely just following the orders from Washington.  Someone came up with the idea to have this scrutiny.

It clearly wasn’t just some rogue Ohioans.

NBC News, IRS higher-ups requested info on conservative groups, letters show

Ed Driscoll, The Ohio Players.  A reminder that the IRS scandal includes the illegal disclosure of confidential applications for exempt status by right-side organizations to a left-side 501(c)(3).

Linda Beale, The real IRS scandal.  To her, the real scandal is that anybody is paying attention.

Patrick Temple-West, IRS gets a new risk officer, and more (Tax Break)

 

Peter Reilly raises an interesting argument In Defense of Special Tax Breaks:

Clearly there is value in keeping that Greek Revival facade, but there is no way that the owner of the property can reap that value.  If there is a CVS there, I will go in and buy a bottle of Mountain Dew or get a prescription filled which will help pay the rent that the highest and best use yields the property owner.  Having me look at the facade and imagine the men and women who thought that there was an ancient precedent for the new form of government that they were devising is tough to charge for.

That is why there needs to be some sort of public support for the preservation of historic structures. 

I disagree.  As much as I like cool old buildings, giving them special tax treatment means other people subsidize my aesthetic preferences.  What makes that OK, but wrong to make me subsidize a velvet Elvis?   The tax law has enough to do to fund the government; making it the Swiss Army Knife of public policy makes it not very good at anything.

 

Robert D. Flach, DON’T BLAME APPLE!

The fault lies not with APPLE or the members of the 47% or the “wealthy”.  The fault lies with the idiots in Congress who write the tax law. 

Precisely.

 

TaxGrrrl, Copyright Troll Lawyer Pleads Poverty, Asks To Be Let Off The Hook

Tax Justice Blog, State News Quick Hits: Nicolas Cage Lobbies, Massachusetts Raises Revenues and More

 

It’s unconstitutional, except for the part where I cash in.  An case of cognitive dissonance from California via the Central Valley Business Times:

Randy Barker, 59, of Chico, is off to three years and 10 months in federal prison where he can mull over the 16th Amendment to the Constitution, the amendment that established the federal income tax. 

He’s associated with the so-called “Tax Challenger” community, a group that believes that the tax laws are unconstitutional or otherwise invalid. 

According to testimony presented at trial, Mr. Barker filed an income tax return in February 2009 that falsely claimed more than $1.4 million in interest income and falsely claimed that the same amount had been withheld in tax.

So paying tax returns is unconstitutional, but it’s just fine to file returns claiming that the government is sitting on a bunch of your money?  I need to re-read my constitution.

The most interesting part to me:

This combination allowed Mr. Barker to claim a refund of $987,900 in allegedly overpaid income tax.

Evidence showed that, after receiving the refund, Mr. Barker and his wife spent most of the money within weeks by making extensive cash withdrawals and by purchasing a $495,000 house, more than $90,000 in home furnishings, and a truck.

So this guy managed to steal almost $1 million with a laughably stupid tax return.  Sure, he got caught, but that money is gone forever.  I suppose the IRS is just too busy examining prayers to stop cash from flying out the back door.

 

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Tax Roundup, 5/29/2013: Why Did Shulman spend so much time at the White House? He has no idea.

Wednesday, May 29th, 2013 by Joe Kristan
The tax law - The Ultimate Swiss Army Knife of public policy.  Flickr Image courtesy redjar under Creative Commons license.

The tax law – The Ultimate Swiss Army Knife of public policy. Flickr Image courtesy redjar under Creative Commons license.

If you or I went to the White House, we’d remember it always.  I have been inside the Treasury once, and the IRS building once, and I definitely remember it.  But when you are a real mover and shaker like Doug Shulman, it all starts to blur, apparently.

From WashingtonExaminer.com:

Former Internal Revenue Service Commissioner Doug Shulman visited the White House 118 times between 2010 and 2011. Acting Director Steven Miller, who took over at the IRS in November, also made numerous visits to the White House, though variations in the spelling of his name in White House visitor logs makes it difficult to determine exactly how many times.

The frequent trips to the White House under Obama far outnumbered the times other administrations felt the need to meet with the IRS, according to Mark Everson, who led the IRS under former President George W. Bush. Everson said he remembers making only one trip to the White House between 2003 and 2007 and said he felt like he’d “moved to Siberia” because of the isolation.

Funny, I thought the IRS was an “independent agency.”

Shulman said he couldn’t remember why he went to the White House so frequently, though some of the visits were probably about the IRS’ role in implementing Obama’s health care reforms, he told a congressional committee. Logs show Shulman met with two West Wing officials working on health care.

“The IRS has a major role in the money flow,” Shulman explained to Congress.

But while the health care-related visits were explained in the logs, many others included no explanation.

I doubt Shulman met with the President or his aides to plot audits of presidential enemies — though you’d think he’d be able to figure out why he spent so much time there.  Do they still have a bowling alley?

It’s likely that his visits reflect the way the IRS has become a cross-functional super-agency, with bigger responsibilties than most cabinet departments.  That is at least as disturbing as the outrageous Tea Party harassment.

 

Don Boudreaux, Count on It: Power Will Be Abused:

The fundamental question raised by the IRS scandal isn’t whether Obama ordered, or even knew of, the apparent misuse of the taxing power to punish political opponents. Rather, the fundamental question asks about the wisdom of creating in the first place government agencies that can so easily abuse their power in order to play political favorites.

The question answers itself.

 

Linda Beale thinks it’s just fine to harass the Tea Party:

This so-called “scandal” is just another instance of right-wing obstructionism that is willing to sacrifice good government for maintaining or increasing political power.

Um, no.  Even President Obama says that what the IRS did was a bad thing.  It’s a little late to try to pretend that it was just the IRS doing its job.  Unless, of course, you think its job is to obstruct political opposition and coddle organizations congenial to Linda Beale.

 

Patrick Temple-West, Groups test political tax rules, and more (Tax Break)

Martin Sullivan, TIGTA Report Implies a Lot, Proves Little, About Bias at the IRS (Tax Analysts Blog)

TaxProf,  The IRS Scandal, Day 20

 

Jack Townsend covers a developing U.S. – Swiss tax enforcement agreement in Swiss Settlement May Be Near and More Developments on Swiss Agreement with U.S.: “With this development, I am sure that the IRS will be sending a lot of John Doe treaty requests.”

 

Paul Neiffer, More States to Raise Taxes?

Scott Drenkard, Wisconsin Plan Cuts Rates, Broadens Bases, Improves State Business Tax Climate Ranking (Tax Policy Blog).  Iowa should try that sometime.  The Quick and Dirty Iowa Tax Reform Plan is ready to go!

 

Peter Reilly, Tax Reform – Should Partnerships And S Corporations Follow The Same Rules ?

Howard Gleckman, The Challenge of Cutting Deductions to Lower Tax Rates (TaxVox)

TaxGrrrl, Internet Sensation Charles Ramsey Gets Free Food From McDonald’s: Do You Want Taxes To Go With That?  If he takes them up on it, the medical deductions may offset any taxable income.

 

Joseph Thorndike, Krugman Berates a Bush — Unfairly (Tax Analysts Blog)

Jim Maule, Reader Weighs In on Weighing the Code

 

Of course he does.  Nicolas Cage Urges Nevada to Subsidize the Film Industry (Joseph Henchman, Tax Policy Blog)

Let us praise our dedicated civil servants.  IRS employee charged with going on a years-long buying spree with Uncle Sam’s credit card (Kay Bell)

A disgrace to his profession. Las Vegas pimp faces prison after pleading guilty to tax-evasion charge

It’s good to be king.  Princess, maybe not so much. Princess Cristina to be investigated for tax fraud

 

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Tax Roundup, 5/24/2013: Tuition organization credit bill has big sales tax provision. And: Fancy guys, bow ties.

Friday, May 24th, 2013 by Joe Kristan
Via Wikipedia

Via Wikipedia

In its usual last-minute frenzy, the Iowa General Assembly passed a bill (HF 625) to extend the popular School Tuition Organization credit.  The credit is 65% of the amount contributed to organizations that subsidize private elementary and secondary tuition.  When combined with the federal tax deduction for the donation, there is very little out-of-pocket cost for the donations.  The amount of the credit is limited, so it has been oversubscribed in recent years. the bill increases the cap starting in 2013.

The bill has a surprising amendment that passed yesterday: it now creates “affiliate nexus” in Iowa (my emphasis):

   (1) A retailer shall be presumed to be maintaining a place of business in this state, as defined in paragraph “a”, if any person that has substantial nexus in this state, other than a person acting in its capacity as a common carrier, does any of the following:
       (a)  Sells a similar line of products as the retailer and does so under the same or similar business name.
       (b)  Maintains an office, distribution facility, warehouse, storage place, or similar place of business in this state to facilitate the delivery of property or services sold by the retailer to the retailer’s customers.
       (c)  Uses trademarks, service marks, or trade names in this state that are the same or substantially similar to those used by the retailer.
       (d)  Delivers, installs, assembles, or performs maintenance services for the retailer’s customers.
       (e)  Facilitates the retailer’s delivery of property to customers in this state by allowing the retailer’s customers to take delivery of property sold by the retailer at an office, distribution facility, warehouse, storage place, or similar place of business maintained by the person in this state.
       (f)  Conducts any other activities in this state that are significantly associated with the retailer’s ability to establish and maintain a market in this state for the retailer’s sales.
       (2)  The presumption established in this paragraph may be rebutted by a showing of proof that the person’s activities in this state are not significantly associated with the retailer’s ability to establish or maintain a market in this state for the retailer’s sales.

This ratifies the aggressive approach of the Iowa Department of Revenue on intangible nexus, and will likely trigger more audits of out of state companies.  The Supreme Court and Congress really need to either reaffirm the Quill decision or set new rules.

Tax Justice Blog, Tax Credit for Working Poor Survives Iowa Tax Compromise.  Remember, it’s also a thief subsidy.  Just because it’s supposed to go to the “working poor” doesn’t mean it does.

 

Christopher Bergin, The IRS Is Broken, But That’s the Symptom (Tax.com):

The IRS is broken, that’s for sure. But the IRS is a symptom. The “disease” is the tax code. I think that’s absolutely right. And for me, this latest “scandal” concerning the IRS is going to make it impossible to reform our tax code anytime soon.

More difficult, but more necessary.

 

TaxProf, The IRS Scandal, Day 15

Kay Bell, IRS places Lois Lerner on administrative leave in latest fallout from Tea Party tax exemption review snafu

Joseph Henchman, Congress Asks Organizations Targeted by the IRS to Come Forward and Tell Their Story

 

Tax Trials, See You on Tuesday: IRS Furloughs Impact Certain Filing Deadlines & Services

Linda Beale, Does Apple’s Cook Cook the (U.S. tax) Books?

Jack Townsend, IRS Reminders for Foreign Income Reporting

Robert D Flach is Buzzing!

The Critical Question: Could State Taxes Cause Dwight Howard To Flee L.A. For Houston? (Anthony Nitti)

 

Breaking news from my neighborhood: Woman Allegedly Brandishing Knife ‘Welcomes’ New Neighbor.  How my neighbors are living out the pages of The Onion.

20130524-1

 

News you can use:  Apparently It Doesn’t Take Much for an Accountant to Get Kidnapped and Beaten These Days… (Going Concern)

Always trust tax advice from rappers. Fat Joe Blames His Tax Evasion Problems On ‘Fancy Guys In Bow Ties’

 

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Tax Roundup, 5/23/2013: Iowa property taxes improve, income tax gets worse. Plus: more Apple bites.

Thursday, May 23rd, 2013 by Joe Kristan
If Iowa's income tax were a car, it would look like this.

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

The Iowa General Assembly nears the end of its annual rampage.  While it finally did something to improve a bad commercial property tax system, it managed to make an already awful income tax a little worse.

The Iowa Senate cleared a property tax plan (SF 295) yesterday to reduce commercial property assessments by 10%, with additional property tax credits for smaller businesses.  Unfortunately, the price was to more than double Iowa’s version of the fraud-plagued Earned Income Tax Credit and, it appears, to clutter up the 1040 with additional petty tax credits — those these provisions are apparently part of a separate bill.

As if that weren’t enough abuse to the income tax, the Senate also increased Iowa’s tax credit corporate welfare budget by $50 million  (HF 620) by increasing the amount of tax credits that the economic development bureacracy can hand out.  They sweetened the corporate welfare pot by enabling the diversion of employee withholding to local crony capitalist slush funds economic development funds.

Another bill, HF 625, increased the popular school tuition credit, a poor substitute for true school choice.

While the politicians will pat themselves vigorously on the back, the net result isn’t very exciting.  Yes, lower rates for commercial property are needed.  But now Iowa’s dysfunctional income tax is larded with even more corrupt special interest favors, which will make it that much harder to ever enact a system that makes sense for taxpayers without lobbyists and connections.

Related:

David Brunori, Soviets Run Mississippi, Planned Economies and All (Tax Analysts Bl0g)

The Quick and Dirty Iowa Tax Reform Plan.

 

TaxProf, The IRS Scandal, Day 14

Going Concern, Lois Lerner Knows What You People Are Thinking

 

Andrew Lundeen, Apple’s Appearance before the Senate Clarifies the Need for Comprehensive Tax Reform (Tax Policy Blog):

Our average combined rate of 39.1 percent is the highest in the industrialized world. In an increasingly globalized world, this matters more today than it did the last time we reformed the code in 1986. Today the U.S. has to compete with countries around the globe who are constantly improving their tax codes. When the U.S. fails to do so itself, American consumers, workers, and shareholders lose out.

Kyle Pomerleau, Another Perspective on the Apple Hearing (Tax Policy Blog):

Politicians created the current corporate tax system and the current system is broken. If you are going to set out a menu of options for corporations to reduce their tax burden, don’t be surprised or upset that corporations take advantage of them.

Indeed.

 

Linda Beale, Citizen for Tax Justice’s Bob McIntyre on Apple’s offshore profit-hoarding.

 

Robert D. Flach, A KIND OF CATCH-22  On the compliance burden of the fraud-ridden Earned Income Tax Credit.

Tax Trials, See You on Tuesday: IRS Furloughs Impact Certain Filing Deadlines & Services

Kay Bell, IRS offices will be closed Friday, May 24. Plan accordingly

Jack Townsend, Tax Perjury and FBAR Charges Related to Illegal Income Fake Art Case

 

Cara Griffith, A Missed Opportunity in Texas (Tax Analysts Blog)  An attempt to enact an independent tax court in Texas fails:

“The importance of an independent tax tribunal is well documented in the pages of tax journals and even mainstream media outlets.” 

Iowa has nothing like an independent tax appeals process.

Me, Playing with fire: Using an IRA to finance your business.  My new post at IowaBiz.com, the Des Moines Business Record blog for entrepreneurs.

 

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Tax Roundup, 5/21/2013: thief subsidy edition. And why the IRS scandal is so depressing.

Tuesday, May 21st, 2013 by Joe Kristan

20130117-1Iowa’s elected leadership has come up with a deal to bring down Iowa’s high commercial property taxes in exchange for an increase in Iowa’s earned income tax credit.  The Democrats who control the Senate have long been pushing for an increase in the EITC, and this seemed like an obvious compromise from early in the session.  There will be much rejoicing if the deal gets completed, as appears likely; property tax reform has been the Governor’s highest legislative priority.

It’s too bad that the cost of a sensible property tax is a big increase in a program that is a poverty trap for honest taxpayers and a pinata for thieves.  The phase-outs of the EITC result in shockingly-high marginal tax rates on each additional dollar earned by relatively low-income taxpayers.

The EITC  is refundable, which means it is really a welfare program run through tax returns.  About 25% of the EITC is claimed “improperly,” which is a nice way to say it’s stolen.  The annual cost of the Iowa EITC boost is estimated at $35 million, so the price of fixing a broken commercial property tax regime is an $8 million annual thief subsidy.  So while the politicians celebrate their great compromise, Iowa’s petty thieves also have occasion to raise a glass, filled by you.

 

TaxProf,  Supreme Court Unanimously Reverses Third Circuit, Says PPL Can Claim Foreign Tax Credit for U.K. Windfall Tax and Avi-Yonah and Christians on Yesterday’s PPL Decision.

 

Jeremy Scott, Rand Paul’s Claim of “Written Policy” Seems Like GOP Overreach

It is unlikely that Republicans will find Paul’s smoking gun, but the IRS scandal is almost certainly the result of political bias on some level.  It is hard to believe that a group of officials would innocently pick terms like “Tea Party,” “patriot,” and “9/12” to single out organizations for additional scrutiny.  It would be incredible to find such disinterested tone-deafness even in the most politically insulated of civil servants (and the IRS is far from insulated).

I doubt the White House left fingerprints on IRS efforts to harass political opponents (though it didn’t lift a finger to stop it).   That leads to an even more depressing possibility: that the IRS went out its way to beat up on the President’s opponents on its own.  Nobody blew the whistle.  That means IRS management is so corrupt and political that it would go after the administration’s political opponents with only a wink and a nudge.  And anybody who doesn’t think this was politically-motivated is kidding themselves.

James Taranto puts it well:

And the IRS scandal was a subversion of democracy on a massive scale. The most fearsome and coercive arm of the administrative state embarked on a systematic effort to suppress citizen dissent against the party in power. Thomas Friedman is famous for musing that he wishes America could  be China for a day. It turns out we’ve been China for a while.

 

No-longer-Acting IRS Commissioner Steven Miller

No-longer-Acting IRS Commissioner Steven Miller

Megan McArdle, Yes, What Happened at the IRS is a Scandal

Russ Fox, The IRS Scandal Reaches the White House

TaxGrrrl, IRS Hearing Marks End Of Their Worst.Week.Ever But Congress Signals More Hearings Are On The Way

Kay Bell, House and Senate committee hearings on IRS screening of Tea Party tax-exempt applications set for May 21 & 22

ViralRead, Report: Head of IRS Employees Union Met With President Obama the Day Before Tea Party Targeting Began

The Other McCain, Portrait of a Thug: IRS Union Boss

 

Peter Reilly, Bank Cannot Issue 1099-C And Subsequently Try To Collect

Jason Dinesen, Same-Sex Marriage, Community Property, And Multi-State Income — Part 3

Fiduciary Income Tax Blog, Passive Income: Good or Bad?

 

Paul Neiffer,  A Farmland REIT is Now Publicly Traded

Stephanie Fitch, 5 Questions Congress Should Ask Obama Commerce Nominee Penny Pritzker

William Perez,  IRS Offices to be Closed on May 24

Linda Beale, How Apple avoids US taxes with shell games

 

Going Concern,  Last Year Was a Very Unfortunate One to Be Wealthy and French, Even By French Standards.  When marginal rates exceed 100%, you know a country is off the rails.

Robert D. Flach has a new Tuesday Buzz up!

The Critical Question: NFL Linebacker James Harrison Spends More On Massage Than You Did On Your House. But Can He Deduct It?  (Tony Nitti)

 

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Tax Roundup, 5/14/2013: Worst Acting Commissioner Ever? And a career tip.

Tuesday, May 14th, 2013 by Joe Kristan

 

Acting Commissioner Steven T. Miller

Acting Commissioner Steven T. Miller

Steven Miller, acting head of the IRS since Doug Shulman left office, apparently hasn’t been any more honest than The Worst Commissioner Ever about IRS harassment of right-side political groups.  AP reports:

Miller was first informed on May, 3, 2012, that applications for tax-exempt status by tea party groups were inappropriately singled out for extra scrutiny,    the IRS said Monday.

At least twice after the briefing, Miller wrote letters to members of Congress to explain the process of reviewing applications for tax-exempt status without disclosing that tea party groups had been targeted.

We’re supposed to tell the truth when we file our returns.  It’s not asking too much for them to return the favor.

Not just harassment, but leaking confidential information.  IRS Office That Targeted Tea Party Also Disclosed Confidential Docs From Conservative Groups (ProPublica.org)

No, too late.  White House: Too early to talk about firing IRS employees  (Examiner.com)

So it’s the Supreme Court’s Fault?  Pelosi: IRS Scandal “An Opportunity” To Scrutinize 501(c)(4)s And “Overturn Citizens United”  All right, then.

 

TaxProf, The IRS Scandal, Day 5

Russ Fox, Drip, Drip, Drip: The IRS Scandal Continues to Grow

Jeremy Scott, Lerner’s Admission and Apology Ring Hollow (Tax Analysts):

 The incompetence boggles the mind. It’s also bewildering how the Service could sit in front of GOP lawmakers and chastise them for underfunding tax enforcement when employees were using some of those supposedly precious funds to conduct a politically charged vendetta against conservative exempt organizations.

I think the perpetrators were quite competent in doing what they set out to do.  The only incompetence was in getting caught.  But he’s absolutely right that the agency’s poor-mouthing, including next week’s furloughs, will no longer convince anybody.

 

TaxGrrrl,  Congress And The President Want You To Get Mad At IRS Over Tax Exempt Targets (Just Not At Them):

It’s clear that those at the top knew something (it has been reported that Shulman was alerted to the issue in 2012) and that it wasn’t the work of a handful of rogue operatives. It was a plan. And then IRS lied about it. And they should be held accountable.

But it still disturbs me that no one in Washington really seemed to care until the behavior went public.

Many of us didn’t believe the IRS would really do something so outrageous.  I had seen some of the questions that IRS was asking Tea Party outfits, and they seemed out of line, but I figured the IRS was being an equal-opportunity annoyance.  That they did it politically is what is triggering the outrage.

 

Howard Gleckman,  The IRS Was Wrong to Single Out Tea Parties, But Many Political Groups Should Not be Tax-Exempt.  Yes, let’s change the subject.

Going Concern, Here Are Some of Things People Are Saying About the IRS Scandal,  An excellent roundup of the state of play, but with too much emphasis on the “incompetence” slant and not enough on “evil.”

Patrick Temple-West, IRS targeted groups critical of government, and more (Tax Break)

Kay Bell, Rubio demands resignation of nonexistent IRS commissioner; Obama vows to ‘find out exactly what happened’.  He can get some sleuthing tips from O.J.

Linda Beale,  More on the IRS’s “targeting of conservative groups”.  She tries to play down the issue.  It shows how slim are the pickings for those who don’t want to think this is a big deal.

 

In other news:

Tax.com has moved.  For reasons that elude me, Tax Analysts has apparently given up the handy Tax.com domain and moved their excellent group blog to a tab on their home page, Tax.org.  I think that’s a mistake, but it’s worth going out of your way to find it.

Martin Sullivan, Do U.S. Multinationals Have It Tough? (Tax Analysts).

Russ Fox, Leisure Suit Larry Goes to Tax Court

Peter Reilly,  Electing To Capitalize Expenses Can Pay Off On Sale

Kyle Pomerleau,  Another Year, another Obamacare Tax (Tax Policy Blog)

Jack Townsend,  The Dangers of the Unrecorded Interview by Criminal Agents — FBI or IRS

It’s Tuesday, so it’s Buzz Day at Robert D. Flach’s place.

 

Career Advice.  Protip: Threatening to Kill Your Colleagues, Even in the Midst of a Brutal Busy Season, Is Never Cool (Going Concern).  OK, I take it back.  Mistakes were made. There was no threat intended in my overzealous pursuit of tax return excellence.  It was just an administrative shortcut.  OK, incompetent, but not evil.  I vow to find out exactly what happened.  If I threatened anyone, it was outrageous.

 

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Tax Roundup, 5/13/2013: Modified limited hangout edition. And a tax blog hijacking!

Monday, May 13th, 2013 by Joe Kristan

20130419-1If the IRS hoped Friday’s “apology” for giving extra special attention to tax-exemption applications of right-side groups would settle things, they’re very disappointed this weekend.  The Washington Post reports that the Treasury Inspector General for Tax Administration will soon issue a report saying Friday’s apologizer, IRS Director, Exempt Organizations, knew this was going on in 2011.  Meanwhile, in 2012 IRS Commissioner Doug Shulman was still testifying that IRS was not picking on the Tea Party.

So not only was the Shulman era at IRS grasping, incompetent and casually cruel, it was dishonest.

The Tax Prof has a fresh roundup, The Deepening IRS Scandal.

Another Washington Post story has this:

At various points over the past two years, Internal Revenue Service  officials singled out for scrutiny not only groups with “tea party” or “patriot” in their names but also nonprofit groups that criticized the government and sought to educate Americans about the U.S. Constitution, according to documents in an audit conducted by the agency’s inspector general.

The documents, obtained by The Washington Post from a congressional aide with knowledge of the findings, show that the IRS field office in charge of evaluating applications for tax-exempt status decided to focus on groups making statements that “criticize how the country is being run” and those that were involved in educating Americans “on the Constitution and Bill of Rights.”

Yes, we sure need to keep an eye on those wingnuts who want to educate people on the Constitution and Bill of Rights.  Dangerous lunatics, they are!

There is so much blog coverage of this that I won’t even try to round it all up.  A few links from our blogroll:

Megan McArdle,  Why Did the IRS Target Conservative Groups?

Going Concern, Footnotes: Tea Party Patriots to IRS: Drop Dead

TaxProf,  Schmalbeck on the IRS ‘Targeting’ of Conservative Groups, where an academic gives a ”nothing to see here” take, one that is already largely overtaken by events.

 

And some other coverage:

Connor Simpson,  Why the IRS Abruptly Apologized to the Tea Party  (via Instapundit):

The report doesn’t shay whether or not Shulman was informed about the Tea Party questioning, but it does show the IRS’s chief counsel was. It’s standard procedure for the counsel and commissioner to discuss this  sort of thing before a Congressional hearing.

If so, The Worst Commissioner Ever can only plead incompetence instead of lying to Congress.

Reason.com has a bunch of posts at their Hit and Run blog, including  Matthew Feeney,  IRS Scrutiny Extended Beyond Tea Party Groups (Reason.com); Jesse Walker,  A Brown Scare at the IRS?; Matt Welch,  NY Times: IRS Targeting of Tea Party Only Proves Republicans Are Desperate  “It’s the inability to see discrete news events for what they are, rather than what they might mean for the neverending scrum between Teams Red and Blue.”

Jonathan Adler,  IRS Scrutinized Teaching the Constitution (Volokh Conspiracy)

Professor Bainbridge, Wider Problems Found at IRS – Twisting slowly in the wind

William Jacobson,  IRS anti-Tea Party scandal gets real — senior IRS officials aware of targeting (Update – Chief Counsel knew and targets expanded to groups “educating on the Constitution and Bill of Rights”)

Katrina Trinko, Rubio: IRS Commissioner Should Resign Immediately (The Corner)

Ann Althouse has more.

And here’s my take from Friday, if you missed it:   Look at a celebrity return?  You’re fired!  Harass a Tea Party outfit?  Carry on.

 

In other news:

Nina Olson, IRS Taxpayer Advocate, has an article in Tax Analysts (via the TaxProf) affirming her support for taxpayer regulation.  Ms. Olson has done much good work as Taxpayer Advocate, but her support for increased preparer regulation is economically uninformed and hopelessly wrongheaded.

 

Russ Fox,  IRAs and Owning a Business Through an IRA and  What Can Go Wrong?  Nevada Democrats Want to Give Tax Breaks to Movie Industry

Peter Reilly,  Brooklyn Grandmother Wins On Dependency Exemption.   Just in time for Mothers Day!

TaxGrrrl,  IRS Set To Close Next Week.  Bad news: it’s only temporary.

 

Trish McIntire,  Max and Dave Looking for Reform

Nick Kasprak,  Do Tax Cuts Pay for Themselves?

Patrick Temple-West,  Falling deficit alters budget debate, and more

Linda Beale,  Orrin Hatch on tax reform at the ABA–a predictable right-wing rant

 

Andrew Mitchel,  Barnes Group – Structured Repatriation Was a Dividend.  In spite of the best efforts of national tax firms.

Phil Hodgen,  Decline of American Civilization, Form 8938 Edition.  “Let’s just bury the world in useless paperwork, shall we?”  That does appear to be the plan.

 

Kay Bell,  IRS reports gains in criminal tax, other financial investigations

Jack Townsend, Cheating is Cheating, Except When Offshore Accounts Are The Means, followed up with More on Conviction Rates in Tax Cases.

Janet Novack,  Independent Contractor Enforcement: There’s More Than The IRS To Fear.  Plenty of state rules and taxes also come into play.

Jim Maule,  The Complexities of Tax: Is This Really Necessary?  “A recent IRS private ruling, PLR 201318003, illustrates how the special low rates for capital gain adds layer upon layer of complexity to the tax law.”

 

I’d like to report a hijacking.  It looks like somebody at Tax Analysts forgot to renew their ownership of the  tax.com domain name.  Going there this morning gets this:

20130512-1

Tax.com is (has been?) home to the great group blog featuring, among others, David Brunori, Christopher Bergin, David Cay Johnston, Martin Sullivan, Cara Griffith and Clint Stretch.  I hope this is only a temporary hijacking.

 

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