Posts Tagged ‘Linda Beale’
Thursday, November 8th, 2012 by Joe Kristan
The Tax Update is on the road in beautiful Denison, Iowa, birthplace of Donna Reed!
I’m speaking at the Iowa State University Center for Agricultural Law and Taxation Farm and Urban Tax School. There’s still time to register for the remaining five sessions!
“‘There are a lot of sales right now,’ explains Steve Bruere, president of Peoples Co. in West Des Moines.” From IowaFarmerToday.com:
“I see a drop off (in the number of sales) after the first of the year.”’s one logical response to the looming increase in capital gain rates.
…
With potential sellers concerned they may have to pay a 20 percent capital gains tax rate instead of 15 percent, and with many of them questioning what other tax changes may be coming, there has been a push to sell now.
The logic says if you were seriously considering a land sale, you would make sure it happened before the end of the year, Bruere says.
Actually, the rate will probably be 23.8%, including the new Obamacare tax on investment income.
More to look forward to: “The IRS Small Business/Self-Employed Division plans to increase its audit activity for passthrough entities beginning in 2014, SB/SE Commissioner Faris Fink said November 7,” reports Tax Analysts ($link). But if you operate a C corporation, don’t be smug:
SB/SE is planning a one-year National Research Program project to study areas of noncompliance. Under the project, the division will examine 2,500 returns from corporations with assets of less than $250,000, Fink said.
Something to look forward to, like a colonoscopy appointment.
The Election is over. Now what?
TaxProf, Boehner Would Accept ‘New Revenue’ Under ’Right Conditions’
Going Concern, Hold the Phone, John Boehner Didn’t Say Anything About Taxes Going Up
Martin Sullivan, Wanna-Be Tax Reformers Need a Dose of Reality (Tax.com)
Daniel Shaviro, Boehner on the possible terms for a fiscal cliff deal
Kay Bell, Investors sell stock ahead of fiscal cliff, plus locking in 15 percent capital gains
Patrick Temple-West, How far can Obama push on key issues including tax increases, and more
Anthony Nitti, With The Election Over, We Can Finally Do Some Meaningful Tax Planning. Six Year-End Steps To Consider. #6 is bold planning indeed.
In other news…
Robert D. Flach, DEDUCTING SANDY
William Perez, New Jersey Tax Relief for Hurricane Sandy
Linda Beale, Tax Relief for Victims of Sandy
Richard Morrison, Chart of the Day: Can Taxing Millionaires Eliminate the Deficit? (No).
Brian Strahle, How Virginia Based Companies Can Reduce Their State Income Tax Liability
TaxGrrrl, IRS Commissioner Says Public Goodbye After Election 2012
Jack Townsend, Commissioner’s Swan Song – Excerpts on Offshore Bank Initiatives
Tomorrow is Doug Shulman’s last day as IRS Commissioner. So how is the fight against tax refund fraud going?
Tampa Police Chief Jane Castor went public with her irritation at the slow pace of the investigation into a piece of the tax fraud scourge spreading among street criminals. Authorities say hundreds of millions of dollars in bogus income tax returns have been processed from the Tampa area alone.
“We have an individual that we know did in the ballpark of $9 million in tax fraud,” Castor said in February. “He was arrested and charged in September. And there’s no reason for us to believe that he’s slowed down at all.”
In March, Tampa Police Detective Sal Augeri testified before a U.S. Senate subcommittee in Washington about tax refund fraud and described the Simmons case without naming him.
“We have no reason to believe he has stopped committing this crime,” Augeri said then.
Russell B. Simmons, the man referred to above, pleaded guilty this week to tax fraud. He has to give up ill-gotten goods, including “… a $60,000 Bentley coupe and diamond jewelry that included a $30,000, 18-karat gold Rolex watch with a diamond dial; a 14-karat gold men’s bracelet with 2,420 diamonds; a 14-karat chain and “RS” pendant with 703 diamonds; and a 14-karat ring with 110 diamonds.”
Every day the IRS let the identity thief continue to operate, he created new little nightmares, like those experienced by Jason Dinesen’s client, for the innocent taxpayers whose identities he stole. Meanwhile, Commissioner Shulman was focusing IRS resources on creating a big, expensive and futile preparer regulation bureaucracy. A man has to have priorities, after all.
Tags: Anthony Nitti, Brian Strahle, Daniel Shaviro, Farm Tax School, Going Concern, identity theft, Jack Townsend, Kay Bell, Linda Beale, Martin Sullivan, Obama Tax Policy, Patrick Temple-West, Richard Morrison, Robert D Flach, Shulman, Tax Grrrl, TaxProf, William Perez, worst commissioner ever
Posted in Tax Roundup | 1 Comment »
Tuesday, October 30th, 2012 by Joe Kristan
Des Moines has an odd “Beggars’ night” tradition of having “trick-or-treats” on the night before Halloween. That means it’s not too early for a spooky story.
Once upon a time, a man ran a payroll service in Ohio. Employers sent their money to the man thinking he was paying their payroll taxes. The man instead kept the money. From ToledoBlade.com:
Robert Sacco, the former PaySource owner accused of bilking the IRS of $26.7 million, pleaded guilty to federal felony charges before his trial was scheduled to start Monday.
Sacco pleaded guilty to conspiracy to defraud the United States by impeding the Internal Revenue Service, money laundering, and tax evasion. “This is one of the highest amounts of employment tax fraud we’ve ever seen,” said Craig Casserly, spokesman for IRS office in Columbus.
Sacco defrauded the IRS by withholding money from employees’ paychecks for taxes, then keeping the money instead of paying it to the IRS, according to Carter Stewart, U.S. Attorney for the Southern District of Ohio.
Why didn’t the employers use EFTPS, the Electronic Federal Tax Payment System, to monitor their payments on line? The man made sure they couldn’t:
Dayton-based PaySource employed 40 people. It was a co-employment company — meaning that it hired a client company’s employees, thus becoming their employer of record for tax and insurance purposes.
So the payments weren’t made under the real employers’ tax numbers, and there was no way for them to monitor it using EFTPS.
The moral? There are legitimate co-employment companies that have plenty of satisfied customers. The problem is that the format is also handy for thieves because it makes monitoring very difficult. If you are considering outsourcing to a co-employment payroll provider, it’s extremely important to do careful due diligence, and to re-do it regularly. Without EFTPS, you can’t directly verify their performance, so you have to use other ways to assure compliance. If your payroll provider doesn’t remit your taxes, the IRS will still expect you to pay them.
Brutal Assault on Reason Watch:
Howard Gleckman, What is Mitt Romney’s Tax Plan? (TaxVox)
Patrick Temple-West, Essential reading: Washington Post reports Obama administration looking at new tax cut, and more (Tax Break)
Kay Bell, Who’s the scarier Halloween costume, Barack Obama or Mitt Romney?
Linda Beale, Romney’s CRUT Tax Shelter
Russ Fox, New York Extends Tax Deadlines Because of Sandy; Expect the IRS, New Jersey, Pennsylvania and Others to Follow
William Perez, New York Provides Tax Relief for Hurricane Sandy
Peter Reilly, Hurricane Sandy Tax Planning
Richard Morrison, Chart of the Day: The Increasing Burden on Older Taxpayers (Tax Policy Blog)
Missouri Tax Guy: Small Business Health Care Tax Credit, Do you Qualify?
Brian Strahle, Companies Operating in D.C. Should ACT NOW!!
Jack Townsend, Render Unto Caesar and the Offshore Initiative
Robert D. Flach offers THE WANDERING TAX PRO’S TOP TEN LIST
Paul Neiffer, What the Fiscal Cliff Means To You?
Jana Luttenegger, 2013 Inflation Adjustments (Davis Brown Tax Law Blog)
TaxDood, Lance Armstrong’s Race for Deductibility. No doping allowed.
In case you were worried: One Reason The NFL Will Never Permanently Relocate A Team To London: The U.K.’s Tax Treatment of Nonresident Athletes (Anthony Nitti)
Tags: Anthony Nitti, Beggars Night, Brian Strahle, Des Moines, Howard Gleckman, Jack Townsend, Jana Luttenegger, Kay Bell, Linda Beale, Missouri Tax Guy, Patrick Temple-West, Paul Neiffer, Peter Reilly, Richard Morrison, Robert D Flach, Russ Fox, Taxdood, William Perez
Posted in Tax Roundup | No Comments »
Friday, October 26th, 2012 by Joe Kristan
What is it about Iowa and ESOPs? Iowa seems to have more than its fair share of tax litigation involving Employee Stock Ownership Plans. (See here, here, and here for examples) Iowa’s unusual prominence in this obscure area of the tax law is due in part to a group of Iowa accountants who pushed the plans heavily in the 1970s and 1980s, touting “The Miracle of ESOP.”
An Iowa ESOP will need a miracle on appeal after being revoked retroactively yesterday by the Tax Court. Judge Gerber upheld the 2010 revocation of the plan back to 1995 for several reasons, including failure to timely amend plan documents for tax law changes and failure to get a properly-documented appraisal of the ESOP stock.
Judge Gerber discussed the appraisal problem:
Thielking was the person selected to appraise common stock of a company’s employee stock ownership plan (ESOP) in another case before this Court. In that case, involving similar taxable years, this Court addressed Thielking’s failure to set forth his qualifications as follows:
Petitioner asserts that Thielking was a permissible appraiser of the ESOT’s stock in petitioner. We hold otherwise. Section 401(a)(28)(C) provides that all employer securities which are not readily tradable on an established securities market must be valued by an “independent appraiser”. Since petitioner’s stock is not traded on an established securities market, an independent appraiser had to value the ESOT’s holdings of that stock. As relevant here, an “independent appraiser” means a “qualified appraiser” as defined by section 1.170A-13(c)(5)(i), Income Tax Regs.
The ESOP fails at least two requirements of that section. First, section 1.170A-13(c)(5)(i), Income Tax Regs., requires that the appraisal summary contain a declaration that the individual holds himself out to the public as an appraiser. The appraisal letters covering the 2001 through 2003 plan years state that “The undersigned holds himself out to be an appraiser”. However, there is no signature below that statement on any of the letters (there is an unsigned line for a signature with the word “appraiser” typed below). Second, section 1.170A-13(c)(3)(ii)(F) and (5)(i)(B), Income Tax Regs., requires that the qualified appraiser who signs the appraisal must list his or her background, experience, education, and membership, if any, in professional appraisal associations. The appraisal here is not signed, and the appraisal summary does not list the referenced information.
Hollen v. Commissioner, T.C. Memo. 2011-2, slip op. at 9-10, aff’d, 437 Fed. Appx. 525 (8th Cir. 2011). Thielking’s failure to set forth his qualifications was part of the basis for this Court’s holding that the common stock in that case was not appraised by a “qualified appraiser”.
The circumstances in Hollen were substantially similar to the circumstances in this case.
The appraiser in this case once was associated with a man who told a client I worked with in the 1980s that (I paraphrase) ”Sure, you can use a fancy-pants appraiser and spend a lot of money. You can also use an expensive lawyer for a divorce or you can file your own papers. You’ll be just as divorced, and you’ll save the legal fees.” That apparently works about as well in ESOPs as in contested divorces.
ESOPs can be great tools, but they are not easy to use. 15 years of plan disqualification is likely to be pricey.
Cite: CHURCHILL, LTD. EMPLOYEE STOCK OWNERSHIP PLAN & TRUST.
Wonder what wind energy credits are really all about? Investors Worth $800 Billion Lobby for Wind Energy Tax Credit (Environment News Service)
Unintended but entirely predictable consequences of refundable credits. Investigators: Child tax credit allows fraudsters a chance to cheat (WRAL.com)
TaxGrrrl, IRS Announces Increase In Annual Exclusion For Gifts, Rest Remains a Mystery
Anthony Nitti, The Top Ten Tax Cases of 2012: #10 -The IRS Wages War With The Medicinal Marijuana Industry
Trish McIntire, Playing Chicken With a Career
Patrick Temple-West, Essential reading: CEOs call for deficit action, and more (TaxBreak)
Martin Sullivan, A Watershed Moment: CEOs Say Raise Taxes. (Tax.com). They are free to write their own checks any old time.
Brutal Assault on Reason Watch:
Howard Gleckman, What Is Barack Obama’s Tax Plan?
Kay Bell, What happens if the electoral vote is tied?
Linda Beale, Romney, Family Business, Carried Interest, and potential conflicts of interest
It’s five o’clock somewhere, so catch tomorrow’s Buzz today at Robert D. Flach’s place!
I have lots of ideas. How Not to Spend Tax Revenues (Jim Maule)
News you can use. Toilets Are a Funny Thing (IowaBiz.com)
Tags: Anthony Nitti, ESOP, Howard Gleckman, iowabiz.com, Kay Bell, Linda Beale, Martin Sullivan, maule, Patrick Temple-West, Robert D Flach, tax crime, TaxGrrrl, Trish McIntire
Posted in Tax Roundup | No Comments »
Thursday, October 25th, 2012 by Joe Kristan
Opportunities with the postal service. A mail carrier in Alabama has been accused of picking up more than letters on his route. A Department of Justice press release says Mr. Harrison, a postman, served as a courier for a tax refund ID-theft ring:
Members of the conspiracy filed false tax returns using stolen identities from various locations including the Northern District of Alabama. The fraudulent tax refunds were directed to debit cards that were mailed to addresses on Harrison’s postal route in Montgomery, Ala. Harrison retrieved the debit cards from the mail and, for a fee, provided them to a co-conspirator.
The moral? When it absolutely, positively needs to get there, be the top bidder for your mailman.
Richard Morrison, Chart of the Day: The Demographics of Income Inequality (Tax Policy Blog):
Russ Fox, Nevada Business Tax Initiative Ruled Invalid
My new post at IowaBiz.com: Payroll taxes: Once is enough
Keep firing. Hollywood tax incentives come under fire (NBCnews.com)
Patrick Temple-West, Essential reading: For some of the wealthy, a 0 percent tax on capital gains, and more (Tax Break)
Trish McIntire, Basics of Retirement Tax Planning
Brutal Assault on Reason Watch:
Anthony Nitti, President Obama Releases Agenda For A Potential Second Term: Dissecting the Tax Aspects
Kay Bell, We think Congress is doing a better job. Since they went home, coincidentally.
Daniel Shaviro, Paul Krugman on the worst case scenario if Romney wins
Linda Beale, Tax Questions about the Romney-Ryan Ticket–from Romney’s Tax Returns to Ryan’s Vouchercare
Attention is great, but links are better. Amy Hamilton at Tax Analysts quotes my post from yesterday extensively ($link)
The governor is suggesting “a new tax plan that would exist side-by-side with Iowa’s current complex and loophole-ridden mess,” Kristan said, adding that the plan would require taxpayers to compute their taxes under each system and file whichever return produced the lowest tax.
Thanks! But two quibbles. First – no link? I link to you, you link to me — manners! Second, you didn’t even mention The Quick and Dirty Iowa Tax Reform plan in a discussion of Iowa Tax Reform. Isn’t that like talking about the World Series without mentioning the Giants?
Expensive free sandwiches. From Going Concern:
A St. Louis accountant has allegedly been taking the cheap thing just a little too far by scamming unsuspecting restaurateurs in the area for free sandwiches. Yup, you read that right: free sandwiches.
They call him the Scamwich Artist and it seems he’s been making the rounds, complaining about getting bad food in exchange for gift cards and, well, more food.
The story quotes restaurant personnel as saying the accountant was caught red-handed, and the guy’s picture, taken by a restaurant manager with a smart phone, is now all over St. Louis and the Internet. It will make for interesting conversation at his next client meeting.
Tags: Amy Hamilton, Anthony Nitti, Daniel Shaviro, film tax credits, Going Concern, iowabiz.com, Kay Bell, Linda Beale, Patrick Temple-West, Quick and Dirty Iowa Tax Reform Plan, Richard Morrison, Russ Fox, TANSTAAFL, tax crime, Trish McIntire
Posted in Tax Roundup | No Comments »
Friday, October 19th, 2012 by Joe Kristan
I don’t support increasing taxes on small businesses, as long as they stay that way. Taxes have become an issue in the race for Congress in Iowa’s 4th district. Sioux City Journal reports:
Officials with Christie Vilsack’s congressional campaign are asking eight Iowa television stations to pull a political action group advertisement that says Vilsack supports raising taxes on small businesses.
Lawyers for Vilsack, a Democrat, have sent a letter Thursday to television station managers arguing the ad makes the unfounded accusation that Vilsack supports raising taxes on small businesses.
It apparently comes down to what the meaning of “small” is. From Christie Vilsack’s web site:
Christie Vilsack has proposed allowing the Bush Tax Cuts to expire for those making over a million dollars a year, asking them to pay their fair share. According to the nonpartisan Tax Foundation, as of 2010, less than .1 percent of all income tax filers in the state of Iowa reported an annual income over one million dollars.
That would increase the top tax rate to 39.6% for pass-through businesses successful enough to get their owners to over $1 million in taxable income. There are plenty of Iowans whose closely-held businesses put them over $1 million. It’s a small portion of returns filed, but it’s surely a large portion of Iowa form 1040 business income. Nationwide, 36% of pass-through income is taxed on returns reporting over $1 million, according to the Tax Foundation.
Is a business that makes over $1 million “small?” Obviously it’s bigger than your office Mary Kay reseller’s business, but they are small compared to publicly-traded companies. Are you only small until you are successful? As to whether they are paying their “fair share,” millionaires have an 11% share of national income, but pay 26% of income taxes. Whether that’s “fair,” like whether a business that makes $1 million is “small,” is inherently a matter of opinion.
Brinkmanship at the fiscal cliff. Tax Analysts reports ($link):
President Obama will veto any bill that comes before him if it includes an extension of the 2001 and 2003 tax cuts for income exceeding $200,000 for individuals or $250,000 for joint filers, White House spokesman Jay Carney confirmed October 18.
Speaking of taxes on small businesses.
More inflation adjustments. In addition to the new limits for 2013 pension contributions and the new FICA base, the IRS has issued other inflation adjustments (Rev. Proc. 2012-41) for next year. One key number: the annual exclusion for gift taxes rises to $14,000 per donor, per donee, from $13,000.
Tax Prof, 2d Circuit: Denial of Estate Tax Marital Deduction to Same-Sex Couple Violates Equal Protection
Linda Beale, Another Court Strikes Down DOMA
Robert D. Flach, 2013 INFLATION ADJUSTMENTS
Brutal Assault on Reason Watch:
Obama threatens veto of any ‘fiscal cliff’ bill that doesn’t hike taxes on the rich
Patrick Temple-West, Essential reading: Officials say Obama could veto a bill blocking ‘fiscal cliff’ without tax hike for rich, and more
TaxGrrrl, More on Romney’s Tax Returns
Howard Gleckman, The Real Lesson About Capping Itemized Deductions (TaxVox)
Jim Maule ponders Fishing for Deductions
News you can use: Why the 2013 Tax Season May Give Me Lots More Gray Hair (Russ Fox)
You can’t make this stuff up. Tax return numbers, that is. From the Washington Post:
A local make-up manufacturer who sold lipstick, nail polish and blush to retailers around the world pleaded guilty to tax evasion on Thursday in federal court in Maryland.
Bae Soo “Chris” Chon, the former owner of Mirage Cosmetics in Greenbelt, engaged in a scheme to divert at least $1.8 million from overseas cosmetics sales to foreign bank accounts, according to the plea deal.
The IRS prefers to see your taxable income without the benefit of foundation or blush.
Tags: Christie Vilsack, Howard Gleckman, Kay Bell, Linda Beale, maule, Obama Tax Policy, Patrick Temple-West, Robert D Flach, Russ Fox, tax crime, Tax Foundation, tax policy, TaxGrrrl, TaxProf
Posted in Brutal Assault on Reason Watch, Tax Roundup | No Comments »
Thursday, October 18th, 2012 by Joe Kristan
Battle lines begin to form on Iowa tax reform. Iowa Governor Branstad appears to be preparing to take advantage of state budget surpluses to push a rate-cutting tax reform. A story in today’s State Tax Notes ($link) foreshadows how the battle lines are likely to play out:
However, Iowa Policy Project Research Director Peter Fisher countered that to stimulate the economy the state should restore funding to post-secondary education to offset the cuts made during the recent fiscal crisis.
Fisher also said that lawmakers should consider tax reform proposals that reduce the tax burden on lower-income families that often pay more in state taxes than federal taxes.
“I think there is an equity issue there that should be addressed,” Fisher said.
Where Governor Branstad will focus on cutting rates, the opposition is likely to focus on spending (“restoring funding”) and on once again pushing for an increase in Iowa’s earned income credit, in spite of its built-in tendency to lock people into low incomes through hidden high tax brackets on the poor.
Peter Fisher is likely to provide the think-tank ammunition for the Governor’s opponents; as we have noted, Mr. Fisher thinks Iowa’s business tax climate is just fine, because it’s ineffective:
Fisher argued that the Tax Foundation’s rankings (State Business Tax Climate Index) misrepresent the state’s tax climate. He said that business tax collections as a share of the economy are actually below the national average.
The State Tax Notes piece has the likely response to Fisher-type arguments:
Tax Foundation economist Scott Drenkard responded that while Iowa’s business tax burden may fall in the middle of the pack nationally, it has the highest top corporate tax rate in the country at 12 percent.
The study’s rankings favor tax systems with a broad base and lower rate, Drenkard said. He added that a higher rate with a narrower base creates economic distortions.
Distortions like clobbering in-state suppliers to large manufacturers and in-state C corporations, for example. Or corrupt boondoggles like the now-defunct film credits.
Related: The Tax Update’s Quick and Dirty Iowa Tax Teform Plan,
Howard Gleckman, What the Joint Tax Committee Really Said About Tax Reform
The JCT plan is very different from other tax reform proposals. For instance, Alan Simpson and Erskine Bowles, the chairs of President Obama’s fiscal commission, designed a reform that could get rates as low as 28 percent, but did it by eliminating nearly all tax preferences (not just deductions) and scaling back the few that survived.
So, it turns out, JCT doesn’t contradict groups like the Rivlin-Domenci Commission or Simpson-Bowles, it merely uses different assumptions.
Related: Peter Reilly, Eliminating Tax Expenditures To Cut Rates – Early Results Are Underwhelming
Brutal Assault on Reason Watch:
Roberton Williams, How Much Revenue Would a Cap on Itemized Deductions Raise? “Eliminating all itemized deductions would yield about $2 trillion of additional revenue over ten years if we cut all rates” by 20 percent and eliminate the AMT.”
William McBride, Second Debate Marred by Protectionist Rhetoric
Anthony Nitti, Tax Aspects Of The Obama – Romney Debate, Round 2
Kay Bell, Taxes discussed, sort of, in the second presidential debate
Alan Reynolds, Obama’s ‘Trillion Dollar’ Tax-Cut Fraud (National Review)
Jonathan Easley, Sen. Kerry: Romney trying to ‘perpetrate a fraud’ with tax plan (The Hill)
Linda Beale, Romney’s Tax (Mis)Calculations: if your two and two don’t add to four, pretend the laffer curve gives you more
TaxProf, TIGTA: IRS Unjustifiably Withholds $181 Million in Relief from Tax Penalties from 1.5 Million Taxpayers.
Anthony Nitti, S Corporation Shareholders: Is it Time to Consider Accelerating Income Into 2012?
Kay Bell, It’s workplace benefits — including spending accounts — enrollment time
Robert D. Flach is having an OCTOBER HALF PRICE SALE on his worksheet packages.
News you can use: The 10 Most Corrupt Tax Loopholes (Village Voice, via the TaxProf)
Going Concern, PwC Employee Embraces the Cheapskate CPA Stereotype Like No Other. When I worked for predecessor Price Waterhouse, I was cheap for lack of alternatives.
Will “naming and shaming” intimidate Steven Seagal? California has posted its list of “Top 500 Delinquent Taxpayers.” While somebody better at celebrities could surely find more, I spotted a few familiar names:
Dionne Warwick,$2,598,968.65
Joseph Francis, $819,804.11.
Steven Seagal, $347,849.67
Joe Francis has had his share of tax issues, but can you really “shame” a porn magnate?
Tags: Alan Reynolds, Anthony Nitti, dionne warwick, Going Concern, Howard Gleckman, Jacob Sullum, Joe Francis, Jonathan Easley, Kay Bell, Linda Beale, Peter Fisher, Peter Reilly, Roberton Williams, Scott Drenkard, Steven Seagal, TaxProf, William McBride
Posted in Brutal Assault on Reason Watch, Uncategorized | 2 Comments »
Wednesday, October 17th, 2012 by Joe Kristan
Flickr image courtsy rust.bucket under Creative Commons license
Zappers rampant? A representative of a company that works with sales tax collectors says that the use of tax-evading “zapper” software is rampant, according to a Tax Analysts article ($link). No, frying bugs doesn’t help avoid taxes. The article describes zappers:
Zappers are sales-tax-skimming software often loaded onto memory sticks, CDs, and memory keys, or downloaded from the Internet. Virtually undetectable, the devices are used to eliminate whole transactions or parts of transactions from cash registers and in turn reduce the amount of sales tax known to be owed.
Zappers have received a lot of attention in Canada, where Quebec revenuers required a technical fix, described by CGI representative Bryce Berg as an “ultra-secure” microcomputer that plugs into cash registers:
Quebec required each of its 18,000 restaurants to install the modules in their 30,000 cash registers, Berg said, adding that in the first year the province saw an additional $160 million in revenue from voluntary sales tax compliance.
It would be surprising if sales tax chiselers in the U.S. were any less creative than those in Canada.
Related: ZAPPED!
More refunds for Des Moines? The City of Des Moines, already reeling from a court order to refund $40 million of illegally-collected utility taxes, now may have to repay a $15 million federal grant used to build the Seventh Street Park-and-ride garage.
Brutal Assault on Reason Watch:
TaxGrrrl, Did The Debates Offer Enough ‘Hope and Change’ for the Obama/Biden Ticket? She also live-blogged last night’s debate.
Linda Beale, Romney shows he’s a “know-it-all” who has no real ideas at all
Daniel Shaviro, Cynicism and dishonesty in tax reform debate (although, perhaps, what else is new?)
Richard Morrison, Chart of the Day: Millionaire Status is Fleeting (Tax Policy Blog):
Paul Neiffer, 2013 Social Security Changes:
Remember that the Medicare surtax on earnings in excess of $200/$250,000 per year will apply beginning January 1, 2013. Therefore, the Medicare tax on earnings in excess of those amounts will be 3.8% (split 50/50 between employee and employer).
Janet Novack, Social Security Benefits To Rise 1.7%; Workers Face Up To $2425 Payroll Tax Hike
TaxProf, WSJ: Taxpayers Will Lose Twice if Bankruptcy Court Allows Solyndra Insiders to Harvest $975m of NOLs
Kay Bell, Will popular but costly tax breaks end?
Jason Dinesen, Would a Name Change Help Enrolled Agents? Part 3
And yes, EAs ourselves bear some responsibility. We need to be less crabby and resentful of CPAs and embrace the uniqueness of our designation.
When I give presentations, I always include a slide at the beginning where I talk about my designation. One of the bullet points on the slide says, in bold words: “I don’t work for the IRS!” This helps break the ice and often draws chuckles from the audience.
Jason never seems crabby. Robert D. Flach, maybe, but he’s not an enrolled agent.
None of that sounds good. Do you have any specials today? Which Do You Prefer: Income Tax, Earned Income Tax, Sales Tax, Property Tax? (Jim Maule)
It’s Wednesday, so Robert D. Flach is Buzzing!
Tax trouble for Russ Fox! No, not the tax one. The fish and chips one.
Tags: Daniel Shaviro, Des Moines, Janet Novack, Jason Dinesen, Kay Bell, Linda Beale, maule, Paul Neiffer, Richard Morrison, Robert D Flach, Russ Fox, TaxGrrrl, TaxProf, zappers
Posted in Tax Roundup | 2 Comments »
Thursday, October 11th, 2012 by Joe Kristan
Hey, everybody, those extended 1040s are due Monday!
Doug Shulman shows how much he cares.
Doug Shulman steps down November 9. (TaxProf). Meanwhile, his legacy lives on:
Federal authorities Wednesday stepped up their assault on the viral-like crime of identity theft and tax fraud, arresting dozens of South Florida suspects on charges of filing fake returns totaling millions of dollars.
Three homes were raided Wednesday in an effort to crack down on rampant tax fraud in the Tampa Bay area.
Under Commissioner Shulman’s watch, identity theft tax refund fraud has reached epidemic proportions. The IRS mails perhaps $5 billion of your hard-earned tax dollars to thieves annually, while creating nightmares for taxpayers whose tax lives are disrupted and refunds held up.
Meanwhile, Commissioner Shulman has spent his time terrifying innocent Americans who have foot-faulted their obscure information reporting responsibilities and imposing a useless but expensive preparer regulation regime. Way to go, Commissioner.
Attorney for West Des Moines payroll service says firm will catch up on unremitted client taxes (West Des Moines Patch)
No. If Europe Adds a Financial Transactions Tax, Will We Follow? (Linda Beale)
Martin Sullivan, Don’t Count on Dynamic Scoring (Tax.com). Meanwhile, William McBride, in How Far we are from the Enlightenment (Tax Policy Blog), doesn’t seem to fully agree with Mr. Sullivan.
Patrick Temple-West, Essential reading: Romney pledges to keep tax deductions for mortgages, and more
Peter Reilly, Three Candidates And Carried Interest:
I sometimes think that I am the only person who writes about taxes in a non-technical publication, really understands what “carried interest” is all about and does not find it particularly upsetting.
I guess that makes the Tax Update a technical publication. I don’t think carried interests — profits interests in partnerships — are bad things, and I think the proffered “cures” are.
Daniel Shaviro, 1986-style tax reform: a good idea whose time has passed
Anthony Nitti, Tax Court: In Order to Take A Worthless Debt Deduction, the Debt Need Actually Be Worthless
Kay Bell, 5 tax-saving deductions & credits
Ain’t that the truth: Return Still Not Done (Trish McIntire)
Paul Neiffer, Is the True US Deficit $76 Trillion Instead of $16 Trillion
Need continuing education? Registration is open for this year’s fall tax schools at the ISU Center for Agricultural Law and Taxation. I’m on the Day 1 teaching schedule. Yes, there’s farm stuff, but there’s plenty for us city folk too.
News you can use: If You Equate Long Hours with Hard Work Then You Aren’t “Committed” But You May Be a Dumbass (Going Concern)
This won’t work out well. From Post-Gazette.com
Joseph E. Gump’s trial for evading taxes from 2003 through 2006 had been set to start Tuesday. But Mr. Gump told the court last week that he would plead guilty, prompting the judge to cancel a call for 50 prospective jurors.
Then Mr. Gump wrote to U.S. Judge Terrence F. McVerry’s staff saying that a guilty plea “would be a lie” and demanding a trial.
Why?
He said he understood that any prison sentence will likely be less if he pleads guilty, but said he did not believe he engaged in any evasion.
Mr. Gump was accused in a 2011 indictment of indicating “none” as his taxable income for four years during which he earned a total of $250,333 and owed a total of $49,370. He has argued in court filings that the income tax can only be legally levied on federal lands.
Good luck convincing a jury that files returns every April of that.
Tags: Anthony Nitti, Daniel Shaviro, Going Concern, ID theft, Kay Bell, Linda Beale, Martin Sullivan, Patrick Temple-West, Paul Neiffer, Peter Reilly, Shulman, TaxProf, Trish McIntire, William McBride, worst commissioner ever
Posted in Tax Roundup | 2 Comments »
Monday, September 24th, 2012 by Joe Kristan
Mitt Romney filed his extended return on Friday. In addition to remininding us laggards that the extension season will end three weeks from today, it shows us that the Republican nominee has a lot of money. Who knew?
The strangest item may the candidate’s voluntary walking away from a charitable contribution deduction. He did that to ensure the “effective rate” on his adjusted gross income was at least 13%. Of course, he has three years to change his mind and amend his return.
The return has one thing in common with the Obama 1040s: self-employment income. While the Obamas began taking retirement plan contributions based on that income, perhaps because they secretly read the Tax Update, the Romneys do not. They could still set up a SEP plan, amend their returns, and take a 2011 deduction against his director fee income. They may be too busy for that right now, but if you have an extended return with self-employment income, it’s not too late for you!
The campaign also issued a letter from PWC summarizing his taxes over the past 20 years, debunking the foolish innuendo that Harry Reid peddled that Romney had zero-tax years.
The TaxProf has a Romney return roundup. More coverage:
Going Concern: Mitt Romney’s 2011 Tax Returns Reveal He’s the Richest Unemployed Dude You’ve Ever Seen and Footnotes: Romney Tax Returns, Romney Tax Returns and Romney Tax Returns.
Kay Bell, Romney will file an amended 2011 tax return on Nov. 7 … if he loses
Anthony Nitti, Reactions to Romney’s 2011 Tax Return and Romney Forgoes Full Charity Tax Break for 13% 2011 Rate
Janet Novack, On 2011 Federal Income Tax Return, The Romneys Decide Horse Losses Are Personal and Romney Paid At 14% Federal Tax Rate In 2011, Pegs 20 Year Average At 20%
Peter Reilly, Romney Accountant’s Letter – Exercise In Obfuscation ? and Mitt Romney Passing On Nearly Two Million In Charity – Stupidest Thing I Ever Heard
Robert D. Flach, WHOOP-DE-DOO! ROMNEY RELEASED HIS 2011 RETURN!
Related: TaxGrrrl, Ryan’s Amended Returns Offer More Questions Than Answers
Meanwhile, in news that matters: Sweden to Lower their Corporate Rate to 22 Percent, 18 Points below Ours (William McBride, Tax Policy Blog).
More coverage of the Iowa guy who filed as a South Dakota resident: Linda Beale, Tax Home–where the heart is, but not necessarily where the taxes are lowest and Russ Fox, Home Is Where the Family Is.
Jack Townsend, Restitution in Tax Cases
Jason Dinesen, “Consumer Reports” Highlights Identity Theft
Jim Maule, Raising the Tax Shame Noise Level
Nanette Byrnes, Essential reading: GOP retreat on taxes likely if Obama wins, and more
Martin Sullivan, The Critical Question. “If the Obama wins, will the Republicans comrpomise or double down?” Maybe we should ask the Ben Bernanke.
Russ Fox, Las Vegas Attorney Accused of Tax Evasion and Structuring
And it wouldn’t be a weekend without a new Buzz from Robert D. Flach.
Quote of the day:
Wind energy tax credits, like all government-sponsored tax incentives, don’t work. They violate every principle of sound tax policy. The wind tax incentives place the risks on the public and promise the rewards to a chosen few. As the insurance company ad said, even a caveman could see that. Nevertheless, there is a bipartisan crescendo building to ensure the wind energy suppliers continue to receive their credits. (David Brunori, Tax Analysts (subscriber link))
Tags: Anthony Nitti, David Brunori, Going Concern, Janet Novack, Jason Dinesen, Jim Maule, Kay Bell, Linda Beale, Martin Sullivan, Mitt Romney, Nanette Byrnes, Peter Reilly, Robert D Flach, Russ Fox, TaxGrrrl
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Wednesday, September 19th, 2012 by Joe Kristan
Twin Cities hotel magnate gets 4 1/2 years accommodation. From TCBmag.com:
Local real estate developer Jeffrey Wirth was sentenced Wednesday to four-and-a-half years in prison for tax evasion, Minnesota’s U.S. Attorney’s Office said.
In addition, U.S. District Judge Ann D. Montgomery ordered Wirth to pay $6.46 million in restitution to the U.S. Internal Revenue Service (IRS).
Wirth, owner and CEO of Brooklyn Center-based The Wirth Companies, is also the former owner of the Grand Hotel in downtown Minneapolis, the Grand Rios Hotel & Waterpark in Brooklyn Park, and the Grand Lodge Hotel & Waterpark of America in Bloomington—as well as nearly 30 other businesses, according the U.S. Attorney’s Office.
Mr. Wirth is known for his purchase of a $2 million island in Minnetonka, where he built a $3 million house that now sits derelict. How did he get in such trouble?
They often recorded personal expenses as business expenses and claimed false “management fees” in an effort to “reduce the company’s overall taxable income to nearly zero,” the U.S. Attorney’s Office said. Wirth also admitted to understating his own salary to the IRS.
That didn’t go well at all.
Prior coverage here. In unrelated Minnesota news, Prince Fails to Comply With Tax Summons (TaxGrrrl)
$.0113 billion down, 5.1887 billion to go. Fourteen arrested in U.S. tax fraud, identity theft ring (Reuters):
“The defendants in this case allegedly tried to steal $65 million using stolen identities to obtain refunds to which they were not entitled,” U.S. Attorney Paul Fishman said in a statement. They succeeded in getting $11.3 million in refunds.
The Treasury Inspector General for Tax Administration says identity theft refund fraud is a $5.2 billion annual problem. At this rate, it’s going to take a long time to solve.
Thanks, Justice Roberts! ObamaCare “Penalty Tax” Now Estimated to Hit 6 Million Mostly Low- and Middle-Income Americans (William McBride, Tax Policy Blog).
We didn’t mean to screw it up so badly. Senator Grassley says the wave of firings of low-level bank employees for ancient minor legal problems wasn’t what they had in mind. From the Des Moines Register:
U.S. Sen. Chuck Grassley, R-Ia., said the way the new rules are being applied goes against legislative intent and undermines the federal government’s credibility with citizens. The low-level firings are even more problematic given the failure of the Obama administration to arrest even a single big bank executive for professional misconduct, he said.
“There’s a real disconnect between letting bank executives get away with malfeasance on the criminal front and regulations that lead to the firing of rank-and-file workers over minor infractions from decades ago that had nothing to do with bank fraud,” Grassley said.
That’s wonderful, Senator. You guys wrote a stupid law, and now that it’s being enforced, you say you didn’t mean to do that. It’s like if a logger tried his hand at surgery and things went predictably bad; “I didn’t mean to do that” wouldn’t cut it. Yet you guys routinely take your legislative chainsaw to the economy, with horrific results like Dodd-Frank, and Section 409A. Oh, you didn’t mean to do that.
Math is hard. Harkin: The ‘47 percent’ pay higher tax rate than Romney. True? False.
Nick Kasprak, Some Nonpayers Do Pay Income Tax:
Robert D. Flach, THE FAULT, DEAR READER, IS NOT IN OURSELVES, BUT IN OUR CONGRESS. Of course, we elect them.
Matchmaker. About the 47 Percent Who Don’t Pay Federal Income Tax: Mitt, Meet Andrea (Howard Gleckman, TaxVox)
Dan Shaviro, Don’t know much about history
Jack Townsend, DOJ Tax Budget Request: Promo Piece with Some Statistics
Linda Beale, Are lower taxes on “savings” good for the economy? Heritage, CRS and the “Matthew Effect”
News you can use: Facing exorbitant higher education costs? Your Uncle Sam might be able to help (Kay Bell). Of course our Uncle Sam is a big part of why the costs are so high in the first place.
Tags: Daniel Shaviro, Grassley, Harkin, Howard Gleckman, identity theft, Jack Townsend, Jeffrey Wirth, Kay Bell, Linda Beale, Nick Kasparik, Obamacare, Robert D Flach, tax crime, William McBride
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Wednesday, September 19th, 2012 by Joe Kristan
Who know tax policy would finally take center stage in the presidential campaign? The Romney “secret video” saying 47% of taxpayers won’t be interested in him because they pay no taxes continues to crowd high unemployment and foreign policy disaster from the headlines. Will Freeland of the Tax Policy Blog takes an approach nobody else (besides me) seems to have, looking at both taxing and recipients of government spending. It’s worse than 47%:
The red top line is the top 1% of taxpayers; the remaing lines are quintiles of taxpayers, top to bottom. The bottom 3 quintiles (60%) receive more in government payments than they pay in taxes.
If this controls voting (and it doesn’t), Mitt is doomed.
More 47% frenzy coverage:
Kelly Phillips Erb (TaxGrrrl): Note to Romney: We’re all on the dole (USA Today)
Christopher Bergin, Romney Steps in Taxes, Again (Tax.com)
Roberton Williams, Why Do People Pay No Federal Income Tax? (TaxVox)
Peter Reilly, Mitt Romney And The 47% All A Matter Of Context
Trish McIntire, Stoning Glass Houses – Again
Linda Beale, Romney’s Tax Views Lead to Blooper Comments Denigrating America’s Elderly and Poor
Tyler Durden, Your Taxes At Work: All You Need To Know About Who Pays What Taxes In The US (Via Instapundit)
If you’ve ever been snookered into buying a lame extended warranty for a car, you’ll like this. From the St. Louis Post Dispatch:
Cory Atkinson, a former co-owner of what was once one of the nation’s largest seller of auto service contracts, was sentenced in federal court here Tuesday to 40 months in prison on charges of tax fraud conspiracy and tax fraud charges for bilking both consumers and the IRS.
Atkinson, 42, of Chesterfield, will also have to pay $4.49 million in back taxes.
40 months? that’s less than a lot of extended warranties.
The company’s profit on a typically contract worth $2,000 or more was often more than $1,200. Fidelis kept 60 percent of that.
Unhappy customers canceled, sometimes at a rate as high as 60 percent, but US Fidelis staffers were told to arbitrarily withhold 10 percent to 40 percent of their money, according to plea documents.
I suspect few of the extended warranty customers will miss being able to work with this guy for the next 40 months.
You don’t want to give me more money? Traitor! As Taxes Edge Upwards, Leaders Question Taxpayer Patriotism (TaxGrrrl).
True that: Tales from the Tax Field: Don’t “Start a Business” Just to Get Tax Deductions (Jason Dinesen)
Jana Luttenegger, Top Tax Errors in Estate Planning (Davis Brown Tax Law Blog)
William Perez: Avoid the Medicare Surtax by Giving Incoming-Producing Investments to Minor Children
Missouri Tax Guy, Tax Misperceptions – Small Business
Jack Townsend, The Role of the DOJ Tax Division in Criminal Tax Enforcement
It’s Wednesday, so it’s time for a Buzz! Robert D. Flach Obliges.
Going Concern: Audit Finds That IRS Small Business Division Not So Different From That Attractive Person at the Bar That Seemed Really Interested in You
Get ’er done, Iowans! Could Iowans get any fatter? Yes, new study concludes. Related? ISU economist says now may be the time to stock up on meat
I’m going to get even with you by getting myself sent to federal prison! A Nebraska couple has a funny idea of vengeance, based on this item from the North Platte Bulletin:
Evidence presented at trial showed that the Kleensangs had not filed any tax returns in 2003-06 or in 2008-11, U.S. Attorney Deb Gilg said.
The Kleensangs testified under oath in state court proceedings in Sheridan County that they did not have to file tax returns because they were not federal employees and did not live in the District of Columbia.
However, in 2008, together they filed a total of 67 returns for 2007, with David Kleensang filing 57 separate returns for himself and Bernita Kleensang filing 10 separate returns on her behalf.
That’s a lot of returns if you don’t have to file. What’s that all about?
During the investigation, Gilg said the Kleensangs admitted that they filed the bogus returns to “get justice” for judgments that were rendered against them in Sheridan County. The total amount of the refunds they claimed was $48.4 million.
Yeah, we’ll file bogus tax returns. That’ll teach Sheridan County! What could go wrong?
The frivolous returns were detected by the Frivolous Return Program Unit, established by the Internal Revenue Service around 2001, Gilg said. Frivolous returns are pulled and the filer is sent a warning letter that says if the returns are not corrected, the filer could be assessed a $5,000 penalty.
Not only did the Kleensangs not correct their initial returns, they continued to file similar returns for nearly four months, seeking refunds, Gilg said.
So they ended up convicted of fraud and false claims charges. It will be a long time before Sheridan County messes with that couple — six years, anyway.
Tags: 47%, Christopher Bergin, Going Concern, Instapundit, Jack Townsend, Jana Luttenegger, Jason Dinesen, Linda Beale, Peter Reilly, Robert D Flach, Roberton Williams, tax crime, tax protesters, TaxGrrrl, Trish McIntire, Tyler Durden, William Perez
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Wednesday, September 5th, 2012 by Joe Kristan
Governor Branstad’s administration is making a big push to promote STEM education: Science, Technology, Engineering and Math. This headline in the Des Moines Register today shows how badly we need math education, especially in Iowa’s “Economic Development” bureaucracy:
This is the worst kind of smokestack chasing, which is always the preferred approach of “economic development officials.” Never mind that Iowa already has competing fertilizer plants — as Sioux Citian Debi Durham, Iowa chief official economic developer, surely knows. Never mind that Iowa and Illinois are getting played shamelessly by Orascom, the fertilizer company. Never mind that the money comes from taxes paid by existing competitors, and by thousands of unsubsidized businesses like ours, and our employees. Never mind all that — it’s about buying a ribbon-cutting, not about making the state a good place for everyone to do business. Unless, of course, Roth & Company gets a nice state check for $21.3 million for the jobs we have already created.
At least some folks are catching on to the game. From the article:
Orascom has attracted a diverse group of opponents, from parents, environmentalists and liberal groups such as Iowa Citizens for Community Improvement and Iowa Policy Project, to conservative groups such as Public Interest Group, Lee County Tea Party and Americans for Tax Reform.
So there’s agreement from left to right that it’s a bad idea for the state. But if politicians think it’s a good idea for them, it will go through.
Related: Taking your wife’s purse to buy drinks for the girls and LOCAL CPA FIRM VOWS TO SWALLOW PRIDE, ACCEPT $28 MILLION
Who catches the identity thieves? Hint: it’s not Doug Shulman’s IRS. From the Bradenton (Florida) Patch:
Det. B. Pieper from the police department’s gang unit put together the case by paying close attention during a routine drug bust…
Pieper was one of several detectives watching traffic coming to and from a house where police suspected drugs were sold. He said he and his partner watched a car leave the house and then run a stop sign. When they pulled over the car Brydson was in the passenger seat with a laptop and a bag of marijuana on her lap.
Brydson quickly closed the laptop, which made Pieper suspicious. When he searched her purse, he said he found several TurboTax debit cards with different names on them. He also noticed a 60-step instruction sheet on how to perform tax fraud through TurboTax.
So local cops have to do the IRS’s job of stopping the thieves who take $5 billion of our taxes annually while the IRS is busy building a new preparer regulation bureaucracy at the behest of the national tax prep firms. Priorities!
Courtney A. Strutt Todd: Congratulations on Your Scholarship. Don’t Forget to Pay Uncle Sam (Davis Brown Tax Law Blog)
TaxProf, Tax Planks in Democratic Party Platform
Andrew Mitchel, Partnership Definition
Martin Sullivan, The Effects of Interest Allocation Rules in a Territorial System (Tax.com)
Linda Beale, Romney and Private Equity’s Questionable Schemes for Paying Very Little Tax
Kay Bell, Tax moves to make in September 2012
Robert D. Flach has a new Buzz roundup of tax blog posts.
Jim Maule offers A Peek at the Production of Tax Ignorance. It’s booming.
I think spending less than you earn works even better: Do Mandates or Tax Subsidies Do a Better Job of Boosting Savings?
Have a nice day: CBO: Federal Healthcare Spending Will Exceed Discretionary Spending by 2016 (William McBride, Tax Policy Blog)
GIGO: it’s Tax Court Doctrine! From a case rejecting a taxpayer’s use of TurboTax as an excuse for a bad return:
It is apparent that a portion of the information petitioner entered into the TurboTax program was incorrect; hence the mistakes made (which resulted in the underpayment) were made by petitioner, not TurboTax. TurboTax is only as good as the information entered into its software program. See Bunney v. Commissioner, 114 T.C. 259, 267 (2000). Simply put: garbage in, garbage out.
Tim Geithner, call your office.
Cite: Bartlett, T.C. Memo 2012-254.
Related: Reason #17 to Hire Me: Blaming Turbo Tax Can Not Protect You From Penalties (Anthony Nitti)
Tags: Andrew Mitchel, Anthony Nitti, Branstad tax policy, corporate welfare, Debi Durham, economic development, identity theft, Jim Maule, Judge Jacobs, Kay Bell, Linda Beale, Martin Sullivan, preparer regulation, Public Choice Theory, Robert D Flach, Shulman, TaxProf, Tim Geithner, Turbotax
Posted in Tax Roundup | 6 Comments »
Thursday, August 30th, 2012 by Joe Kristan
Sorry about that $2.1 million. Remember the world’s thriftiest tax cheat, the one who stole $2.1 million from Oregon and used it to buy a 1999 Dodge Caravan and some tires? An apology from the director of the Oregon Department of Revenue didn’t go well, according to this report from OregonLive.com:
SALEM — A contrite director of the Oregon Department of Revenue appeared before a legislative committee Wednesday and apologized repeatedly for dropping the ball on a $2.1 million fraudulent tax refund. But both Democrats and Republicans weren’t in a forgiving mood, demanding to know why four workers who failed to catch the return weren’t fired and whether the agency can do its job.
“It’s not going to be enough to sit here and say you’re sorry,” said Rep. Cliff Bentz, R-Ontario.
Why are they so upset? He said he was sorry, after all?
Two managers and one administrative clerk received written reprimands but no change in their salaries. A fourth worker was demoted and transferred to another part of the agency. That person, an administrative specialist, got a pay cut from $45,396 a year to $41,208.
Why is Doug Shulman too darn busy to apologize for letting ID thieves loot the Treasury? Maybe because he’s spending his time making life miserable for Canadians. Tax Notes reports ($link) that
Frustration Grows for Canadians in OVDI:
Taxpayers and their advisers asked the IRS for guidance on how to deal with RRSPs [Canadian retirement accounts] in the summer of 2011 but received inconsistent replies The IRS’s delay in issuing the guidance… annoyed taxpayers because, at least regarding the requests for a letter ruling granting 9100 relief, it caused them to incur professional fees that turned out to be unnecessary.
“This decision could have been made in September, October, even November, and the clients could have avoided the additional costs,” said [attorney] Ciraolo. “While we appreciate the 9100 relief offered under FAQ 54, the fact that the IRS failed to acknowledge the inconvenience and cost caused by the delayed guidance, and failed to address whether the Canadians in the OVDI would be eligible for the new program open on September 1, only furthered the belief of the Canadian taxpayers that the IRS is acting without due consideration to the circumstances of those taxpayers who entered the OVDI in good faith.”
Of course. The program has been haphazardly administered, treating innocent noncompliance with obscure IRS rules as presumptive evidence of offshore money-laundering.
The frustration that the delayed guidance on late elections to file Form 8891 has caused for U.S. practitioners and their Canadian clients exacerbated an increasingly tense diplomatic situation and perhaps convinced some Canadian taxpayers who sat out the 2011 OVDI that noncompliance was the right choice.
So we’ve provoked our closest neighbor while convincng many that non-compliance is safer than expecting the IRS to be fair. Well done, Commissioner!
The AICPA letter described six specific errors the IRS letters claim taxpayers have made, including filing Form 3520 late when it was filed on time.
When you make it harder to follow the rules than to ignore them, the results won’t be good.
This looks like one of those kinds of things that happen when staffing at a government agency is reduced beyond what is reasonable for the kinds of tasks that have to be carried out.
I’d be more sympathetic to that argument if Doug Shulman’s IRS hadn’t taken it upon itself to devote massive resources to an intrusive and futile preparer regulatory scheme
at the behest of the big national tax preparation firms and to requiring massive amounts of futile paperwork for international compliance.
There has been lots of talk over the past few days about how Bain Capital executives have used management fee waivers to effectively lower their tax payments (a tactic that is not unique to Bain). Some academics have argued that such waivers are an illegal dodge, while private equity tax attorneys I’ve spoken with call it “aggressive but accepted by the IRS.”
Here is the basic structure: Bain officially charges 2% management fees to investors in its private equity funds. The idea is to cover overhead, such as salaries, office leases, electric bills, etc. But Bain has lots of other business lines (venture capital funds, hedge funds, etc.) that generate sufficient cash flow, so it “waives” the PE fund management fees…
By doing so, Bain partners don’t pay ordinary income taxes on their management fees. Instead, they pay at capital gains rates if/when the deals generate profit (because it’s now considered carried interest).
Many commentators seem to think that Mitt Romney should have gone out of his way to pay the highest tax possible, rather than doing what his tax advisors and the rest of his industry did. I doubt that they direct their own preparers to forego deductions and exclusions that they think are poor policy or the result of poor administrative interpretations of the tax law.
TaxProf: Mitt Romney’s Tax Mysteries: A Reading Guide
Dan Meyer, The Annual Tax Extenders Legislation Addressed by the Senate. But it has a long way to go.
Peter Reilly, Challenge To Clergy Tax Break Gets Green Light — Next Stop, Scientology?
Jason Dinesen has incorporated.
Anthony Nitti, How Does a “Go Shop” Provision Impact the Treatment of Transaction Costs?
Tags: Athony Nitti, Bain Capital, Dan Meyer, identity theft, Jack Townsend, Jason Dinesen, Linda Beale, Oregon, OVDI, Peter Reilly, Romney taxes, shooting jaywalkers, Shulman, tax crime, TaxProf, worst commissioner ever
Posted in Tax Roundup | No Comments »
Wednesday, August 29th, 2012 by Joe Kristan
Sometimes a “visionary” is just seeing things. The Department of Justice yesterday announced that a “visionary” tax advisor has been enjoined from giving any more tax advice. From the Department of Justice press release:
The civil injunction order against Scott A. Waage, of San Diego, was signed by Judge William Q. Hayes of the U.S. District Court for the Southern District of California. Waage agreed to the injunction without admitting the allegations against him.
The government complaint in the case alleged that Waage, a self-proclaimed “visionary tax attorney,” promoted tax fraud schemes that helped customers evade income taxes through a concept he called “Strategic Integrated Planning.” According to the complaint, one of Waage’s schemes involved creating and using sham consulting corporations (purportedly headquartered in customers’ homes) that did not perform consulting services. Customers funneled funds to the sham companies to pay for and improperly deduct the customers’ personal expenses, the complaint alleged.
They must have lowered the bar for what is “visionary.” Using phony businesses to try to deduct personal expenses isn’t exactly the cutting edge of tax chiseling.
The injunction order requires Waage to give the government a list of all clients who used his tax planning or tax preparation services since 2001. Waage also must send his former clients notice of the injunction order.
That’s the problem when you use a “visionary” tax preparer who is willing to take “aggressive” positions that your everyday namby-pamby practitioner like me won’t touch. When the preparer gets in trouble because he confuses “aggressive” with “absurd,” his clients can expect the IRS to take a close look at everyone on the client list.
“When the Storm is Over,” by Newgrass Revival
Kay Bell, When the storm’s over, don’t forget to claim possible tax help for your losses
Trish McIntire, Disaster Preparedness and Response
Jim Maule, More on Income Averaging:
The special income averaging for farm and fishing income is available regardless of the economic status of the taxpayer. In the meantime, the taxpayer in Francis v. Comr., T.C. Summ. Op. 2012-7, a member of the Armed Forces not counted among the ranks of the wealthy, is stuck with a disappointing tax outcome caused by circumstances beyond his control. Why the better tax treatment for farming and fishing income and not for military back pay? Something about this nation’s tax priorities isn’t right, but those who pay attention have known that for a long time.
But weep for the farmers. 2012 US Net Farm Income At a New Record Even With The Drought! (Paul Neiffer)
Why You Need a Will (Missouri Tax Guy)
Tax headaches if money-market funds are allowed to break the buck? Floating NAVs could prove taxing (Robert N. Gordon)
Linda Beale, Tax Extenders: where the Senate stands.
Howard Gleckman, Should Congress Curb Tax-Exempt Municipal Bonds? (TaxVox)
Shock! Media Leaves Out Key Things in Covering Poll Showing Support for Taxing Rich (Joseph Henchman). “Support for increasing taxes on the rich has been dropping over time, not increasing.”
Daniel Shaviro, Why didn’t the IRS and Treasury do more about aggressive tax planning techniques of the sort that Romney appears to have used extensively? Because they were legal, maybe?
It’s Wednesday, so it’s a Buzz Day for Robert D. Flach.
Anthony Nitti, Blog Author Makes Appearance in Taxes Magazine; Though Regrettably, Not the Swimsuit Issue. No disrespect, but I don’t regret for a moment that “Taxes” lacks a swimsuit issue. There are vanishingly few practitioners you’d want to see that way.
News you can use: Look, It’s Okay, The Big 4 Doesn’t Want You (Going Concern)
Tags: Anthony Nitti, Daniel Shaviro, Going Concern, Joseph Henchman, Kay Bell, Linda Beale, maule, Missouri Tax Guy, preparer penalties, Robert D Flach, Robert N. Gordon, scams, Trish McIntire
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Thursday, August 9th, 2012 by Joe Kristan
IRS Commissioner Douglas Shulman
IRS discouraged fraud detection in ID program (Huffington Post):
The Internal Revenue Service has been looking the other way instead of rooting out fraud when people apply for taxpayer identification numbers, Treasury Department investigators said Wednesday, exposing a shortfall with both financial and national security implications.
A member of Congress who sits on the House’s tax-writing committee responded to the report by calling on IRS Commissioner Douglas Shulman to resign, claiming the IRS is helping illegal immigrants defraud the government.
He wants the Commissioner to resign for that? Considering that the Commissioner oversees the mailing of $5 billion annually to thieves, that he has terrorized and financially ruined otherwise law abiding Americans for footfault paperwork violations, and that he has, with questionable authority, imposed an expensive and futile preparer regulation scheme, this new outrage needs to take a number.
More coverage from the Wall Street Journal, Linda Beale and the TaxProf; read the TIGTA report here and a TIGTA press release here.
Instapundit on state film tax credits:
REPEAL THE HOLLYWOOD TAX CUTS! (LOCAL EDITION): La. film tax break program needs limits, budget group says. “Louisiana has spent more than $1 billion over the past decade to attract movie productions to the state, but hasn’t received much in return besides the prestige of hosting big-name Hollywood actors, according to a report released today. The left-leaning Louisiana Budget Project suggests state lawmakers should put tighter limits on the generous film tax break program, lessening the credits offered and capping the amount of money it can cost the state each year.” Actually, it should be abolished, as should similar programs in almost every other state. And this is something state Tea Party groups might even make common cause with lefties on.
A sadder-but-wiser Iowa repealed its version of the film credits this year after it collapsed in scandal and disgrace and the State Auditor reported that 80% of the credits were issued improperly or lacked documentation. But in defense of the program, two filmmakers are moving to Iowa for up to ten years thanks to the film tax credit!
It’s time to register for this year’s ISU Center for Agricultural law and Taxation Farm Tax Schools! I will be on the Day 1 panel at all eight sessions, starting with the October 29 school in Mason City.
We’re vacationing in the mountains this year, kids. The Plot Thickens for Swiss Bankers Involved In U.S. Evasion: (Jack Townsend):
Swiss bankers whose names were delivered to the United States in April as part of the crackdown on US tax evaders face the risk of arrest while travelling in some European countries, not just on US soil.
Well, the Alps are nice…
Stupidity is no crime: Were Reid’s Remarks About Romney’s Returns Unlawful? (TaxGrrrl)
We’re just getting started! Have We Reached the Nadir of Tax Policy Discourse? (Going Concern)
“Bipartisan” means they’re ganging up on us: Wind energy tax breaks are bipartisan in Iowa (Ames Tribune)
Kay Bell has a new Carnival of Taxes for State Fair week!
Tax Policy Blog: Misunderstanding Tax Reform: The Case of The Olympic Tax Elimination Act
Tags: Anthony Nitti, CALT, Carnival of Taxes, Going Concern, harold hill, Huffington Post, ID theft, Instapundit, Jack Townsend, Kay Bell, Linda Beale, preparer penalties, preparer regulation, Preparers, shooting jaywalkers, Shulman, Siobhan Hughes, Tax Break, Tax Policy Blog, TaxProf, Will Freeland
Posted in Tax Roundup | No Comments »
Tuesday, July 31st, 2012 by Joe Kristan
Robert D. Flach has another CPA-bashing post, making the far-fetched assertion that the new “registered tax return preparer” designation created under the lame new power-grabbing IRS preparer regulation rules will displace CPAs in the tax market. Jason Dinesen, an Iowa enrolled agent, responds with CPAs: Don’t Fear the RTRP. I think enrolled agents have more to worry about, because most people don’t know that they are held to much stricter standards than RTRPs, with their open-book literacy competency test.
It’s an old discussion that hasn’t progressed much. My position is here, but this illustration works as a summary:
“Gallup: Increasing Taxes on the Wealthy Is Lowest Priority Issue, Even Among Obama Voters” (TaxProf) That’s good, because the rich guy isn’t buying anyway.
Tax evasion: “tastes great” or “less filling?” Left-side tax prof and blogger Linda Beale says Tax evaders (and those who aide them), not regulatory complexities, cause tax evasion. That’s true as a tautology, but Peter Pappas correctly notes that complexity is a co-conspirator. When any set of rules gets too complex to follow short of unreasonable effort and expense, people cut more corners — and some ignore them altogether.
Jim Maule explains The Importance of Tax Record Keeping. It’s sad how many taxpayers cost themselves money by being unable to support their deductions on audit.
William Perez: Sales Tax Holidays in Twelve States. Iowa’s two day holiday for clothes starts Friday.
TaxGrrrl: Why I Don’t Believe That Anonymous Hacked The IRS For Romney’s Returns:
If you’ve ever tried to access records from the IRS, you’d know that the likelihood of finding 25 years of data in one place is practically nil. Prior to 1987 (that 25 year mark), tax returns were processed manually. Since that time, the IRS has become much more efficient, but a never ending supply of records isn’t generally available at the push of a button – even on the IRS side. Don’t believe me? Try ordering your old tax records.
So true. KayBell has more, “Romney tax returns obtained by IRS database hacker? Just kidding!“
Tags: Jason Dinesen, Jim Maule, Linda Beale, Peter Pappas, preparer regulation, Robert D Flach, Shulman, TaxGrrrl, TaxProf, William Perez
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Wednesday, May 30th, 2012 by Joe Kristan
What the war on “international tax cheats” means to the cowering civilians in the bombing area. International tax planning attorney Phil Hodgen dined with some Americans working abroad and reports:
For you, the American living overseas, tax return preparation is an order of magnitude more complicated than for someone living at home in the USA. There are extra forms to fill out. Extra stuff to report. Big, big penalties if you fluff things up. So you either spend an inordinate amount of your free time doing the tax returns yourself, or you pay a lot of money to an accountant to do the work for you. I don’t know what the people around the table last night spend, but it would be common to see tax bills of $3,000 – $4,000 in my experience. Let’s say you only spend $2,000. Lucky you.
The amount of tax that the IRS typically collects from people living in Europe and other high tax countries is ZERO. The foreign tax credit (PDF) ensures this. So does the foreign earned income exclusion (PDF).
Short story? You pay $2,000 or maybe much more to do a tax return that yields zero revenue for the U.S. government. And you burn up a lot of nights and weekends doing the paperwork.
Then you hear some Senator yammering about people like you and how you should be paying your “fair share” to the U.S. Treasury.
The whole post is very much worth reading. The pointless burden put on innocent taxpayers by the IRS shoot-the-jaywalkers enforcement of the already ridiculous international reporting rules is most disgraceful of IRS Commissioner Shulman’s many policy blunders.
And Here You Thought It Was Just Peasants Not Paying Any Income Taxes (Going Concern). They quote a Bloomberg article:
The percentage of U.S. taxpayers reporting adjusted gross income exceeding $200,000 who paid no U.S. income taxes increased in 2009 to 0.53 percent from 0.51 percent, meaning that one in 189 high earners avoided taxation, an Internal Revenue Service study found. The filers reported tax-exempt interest along with deductible charitable contributions, medical expenses and other items to legally reduce their taxable income.
Of course, the article is wrong in blaming muni bonds, which aren’t included in AGI in the first place. So how do $200,000 AGI taxpayers get to zero tax? It’s often where net income is overstated because the gross is in AGI but the expense generating the “income” is an itemized deduction. Some candidates come to mind:
- People with big margin interest accounts or other borrowing costs. If you have $200,000 if interest income, you can deduct $200,000 of expense incurred to buy the interest-generating assets. The income is “above the line” and included in AGI, but the deduction is a below-the-line itemized deduction.
- Gamblers. A busy slots player can easily burn through $200,000 in “winnings,” which are above the line, offset by below-the-line gambling itemized deductions.
Another likely example is Old folks in a full-time nursing home. The medical costs can go through the roof.
Readers – if you have other candidates, I’d love to hear about them in the comments. Related: somehow Linda Beale gets from 1 in 189 high-income taxpayers paying no federal tax to one in four. Not a chance. I’d say it was a typo, but she makes the assertion both in her headline and in the article text (UPDATE, 5/31: corrected now)
New state tax credits making solar a better investment for Iowans. (Sioux City Journal). Nonsense. It doesn’t make it a better investment, it just shifts the loss on the “investment” to us chump Iowa taxpayers who have to pay for other peoples’ solar toys.
Because Congressional accounting is always so reliable? FASB under political heat from Congress over lease accounting (TaxBreak)
You man people have to pay for something on their own? Hot, Hot, Hot: Air Conditioning Tax Credits Have Disappeared (TaxGrrrl)
Paul Neiffer: Be Careful if You Have a Foreign Account
Jack Townsend: Why We Cheat and Lie — Taxes Included
Len Burman: Billions in Tax Refund Fraud–and How to Stop Most of it
Howard Gleckman: Tax Reform: Going Long v. Going Prudent
Catch Robert D Flach’s Wednesday Buzz roundup of tax posts.
Dan Meyer: Am”Bushed” by Taxes? Keep or Let Die the Decade-Old Tax Cuts?
Next time he should proclaim himself “Lord Vader of the South” instead. “Self-proclaimed “Governor” of Alabama Sentenced to Ten Years in Federal Prison for Tax Fraud.” Just one more bit of proof that “sovereign citizen” tax schemes don’t work.
At least it’s an aim that any legislator can achieve. “Legislators aim at tax fraud“
Tags: Anthony Nitti, corporate welfare, Dan Meyer, Howard Gleckman, iowa tax policy, Jack Townsend, Len Burman, Linda Beale, Paul Neiffer, Robert D Flach, shooting jaywalkers, Shulman, tax crime, TaxProf, TaxVox, Tick Marks
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Friday, May 25th, 2012 by Joe Kristan
Linda Beale responds to the piece I linked to yesterday about the disincentives to increased income created by the earned income tax credit phaseout. She cites a study that doesn’t really address the question and then says “look, a squirrel” that the real problem is gender bias.
TaxVox links to “A New Urban Institute Calculator Shows What Taxes and Transfers Mean for Low-Income Families” that illustrates the problem Linda Beale waves away:
A single parent in Connecticut with two young children could have received over $18,000 in transfer benefits if she had no earnings and no income, assuming her pre-subsidy rent was $600 per month. But suppose her earnings increased to $17,000 (poverty level) – spread evenly throughout the year – increases in childcare costs (assumed to be $250 per month before subsidies) and payroll taxes would have reduced her earnings by almost $2,000. Income tax credits and transfer benefits would have then added $16,500 – for a total net income of almost $33,000. If her income increased to twice poverty, she’d have to pay almost $5,600 in subsidized child care costs, state income taxes and payroll taxes. She’d receive about $6,400 in tax and transfer benefits – for a net income of $35,000. Thus, doubling her wages from $17,000 to $34,000 resulted in a net change in income of only about $2,000.
To say that result doesn’t discourage work is to say that the poor are bad at math. No, not all of the lost benefits are from the earned income credit phaseout, but that’s an important part of the picture. The phase out of welfare benefits, including earned income credits, can cause marginal rates at some levels to exceed 100%. That problem doesn’t go away no matter how much Linda Beale frets over gender bias. Arnold Kling has made more constructive suggestions:
There are two potential solutions. One solution is to base eligibility for means-tested benefits on total income, including other government benefits programs. Another approach would be to abolish a lot of specific programs and replace them with generic cash assistance.
Simply jacking up the benefit levels of existing programs only makes the disincentive problem worse.
Tags: Linda Beale, tax policy, TaxVox
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Tuesday, May 8th, 2012 by Joe Kristan
Logo via PJ Media
Well, you don’t expect welfare recipients to pay much tax. Tax Free: G.M Hasn’t Paid Federal U.S. Income Tax Since Bankruptcy (Motor Trend)
But they’re doing a bang-up job with their preparer competency tests: IRS falls down in fight on tax return fraud (Tampa Bay Times)
Going Concern: Memo to The New York Times: The Tax Shaming Has Gotten Old
It still is a bad idea that will never pass: The White House endorses the lame bills to increase taxes on some professional S corporations (Linda Beale)
Weaving a tangled web: “According to the indictment, Barbara Murry owned and operated B&B Weaving Shop, which was in the same building as B&B Tax Service.” Ms. Murry and nine family members face federal charges of tax fraud and ID theft in Alabama. Maybe hair weavers don’t make the best return preparers. (Montgomery Advertiser) Russ Fox has more.
Not ready for Prime Time: Operator of “Prime Time Tax Services” in East St. Louis gets four years. The Bellevue News-Democrat reports:
From 2009 to April 2011, Herron and Delaun M. Lelore, of Belleville, engaged in the scheme while operating Prime Time Tax Services in Shiloh and East St. Louis. They helped clients receive inflated federal tax refunds by providing false Schedule C self-employment information, court documents state. In return, clients paid an extra fee, usually $500, to a Prime Time employee who would escort clients to a check cashing business after they received their refund.
If I were going to a check-cashing service in East St. Louis, I’d want an escort too.
No 1099, no tax due? Not necessarily, explains Robert D. Flach.
It looks like the tax scam that thinks we all have big accounts on deposit with the U.S. Treasury for the asking has hit Iowa. “Iowan convicted of lying on tax returns” (KCCI.com, via Jason Dinesen’s Twitter feed)
He still thinks she’s hot even after she copped a plea to testify against him? “Damiani Turns on Wirth” (Russ Fox)
And get off my lawn! “Message to 99 Percenters: Stop Watching TV and Playing Video Games” (Peter Pappas)
News you can use: “Donating TriBeCa Facade Easement Is Like Renouncing Your Super Powers” (Peter Reilly)
Tags: Going Concern, Linda Beale, Peter Pappas, Peter Reilly, Robert D Flach, Russ Fox, tax crime
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Wednesday, February 8th, 2012 by Joe Kristan
There are many reasons the tax law is as awful as it is, but one reason is too often overlooked: the way Congress writes laws to respond to headlines. Two current examples show how this works.
S corporation compensation. Lots of congresscritters remember Newt Gingrich unfondly. When it came out that he used an S corporation, and therefore paid less employment tax than the critters in their infinite wisdom thought appropriate in hindsight, they proposed a new bill, reports Linda Beale. Actually, they’ve repropoposed an old bill — the worst of two bills proposed in 2010 to fight the same “abuse.” The bill would treat S corporation distributions as subject to payroll taxes if 50% or more of a firm’s value was due to the “reputation and skill” of three or fewer owners. As we noted the first time this came around, this bill would punish the smallest service providers (not me! We have ten shareholders) and create horrendous valuation problems. Let’s hope it dies again.
Stock Options. The second example is a new proposal to limit the deduction for stock option compensation expense (via Going Concern). When an employee exercises a typical stock option, the employee has taxable income to the extent the value of the option exceeds the option price; the corporation has a deduction for the same amount. Because the Facebook IPO will reportedly wipe out the company’s taxable income, congresscritters want to delay such deductions. Never mind that the deduction on one side triggers just as much income on the employee side, plus payroll taxes. Never mind that it creates complexity and disturbs a useful simplicity and symmetry. Something must be done!
While the current legislative gridlock may mercifully stop these bad ideas for now, some of the most dreadful parts of the tax law came about as responses to headlines. Examples that come to mind:
- Section 409A deferred compensation rules. These brutal and horrendously complex rules make deferred compensation plans difficult, dangerous and expensive for everyone because Congress thought Ken Lay did bad things.
- The $1 million limit on executive cash compensation — which did much to encourage the option-based compensation plans that the critters suddenly find distasteful.
- The disastrous, fraud-ridden and futile First-time Homebuyers Credit was a headline-driven response to the collapse in housing prices.
- The absurd alternative minimum tax itself was born in response to headlines about rich people avoiding taxes.
Not every problem is a tax problem. Not every result a congresscritter dislikes is a problem. And when there is a tax problem, not every bill is the solution.
Tags: John Edwards Shelter, Linda Beale, Newt Gingrich, tax policy
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Joe Kristan writes the Tax Update items, and any opinions expressed or implied are not necessarily shared by anyone else at Roth & Company, P.C. Address questions or comments on Tax Updates to
