Posts Tagged ‘Linda Beale’

Tax Roundup, 5/10/2013: Pork and Tequila edition.

Friday, May 10th, 2013 by Joe Kristan

Politicians advance plan to allow politicians to give more tax money to private businesses.  From TheGazette.com:

Iowa communities would be able to designate special 25-acre development zones and use a share of sales tax and hotel-motel tax revenues to assist private projects of at least $10 million under legislation that’s getting bipartisan support.

House File 641 would establish reinvestment districts designed to spur development of “big ideas,” said Sen. Matt McCoy, D-Des Moines, who led a Senate Ways and Means subcommittee that revamped the bill representatives approved 87-9 last month.

This is, of course, an awful idea.  Politicians are notoriously bad at allocating investment capital, and they tend to make sure it goes to their cronies and contributors.  But when the state’s Governor, a member of the purported small government party, does an end-zone dance over a giant federal subsidy to a private utility controlled by a billionaire, the battlefield is left to the crony capitalists.  The House version of HF 641 passed 87-9.

 

 

David Cay Johnston, No Bang for the Buck (Tax.com)

New York State’s comptroller says giving $2.8 billion in tax breaks over  five years added more than a million jobs, which would be great news except that the state lost jobs.

I’m confident Iowa’s job-creating tax breaks work just as well.

 

Kyle Pomerleau,  Suggested (Large) Tax Increase on Investors is Far From International Standards (Tax Policy Blog)

For capital gains, the current law is already out-of-step with international standards. After the fiscal cliff, combined state and federal capital gains rates increased from 19.1 percent to 28 percent. This is more than 10 percentage points higher than the international average. One suggestion, of course, is to tax capital gains at the rate at the 1986 rate of 28 percent. This would push America’s average combined federal and state capital gains rate to more than 35 percent, more than double the international average.

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Kay Bell,  Tax-writing committee chairmen launch tax reform website

Howard Gleckman,  Will the Slowdown in Health Cost Growth Change the Budget Debate?  (TaxVox)

Patrick Temple-West,  Tax collections from wealthy are saving government, and more (Tax Break).

Russ Fox,  How Long Should You Keep Your Tax Returns For?

Jim Maule, It’s Not a New Tax

Robert D. Flach offers your Friday Buzz.

 

Jack Townsend,  IRS, UK and Australia Joint Efforts on Offshore Accounts

Linda Beale,  Moving in the right direction: US, UK, Aussies to share tax info

 

Inspirational tax blogging.  No, really:  Five Years After A Brain Aneurysm, Fear Of Dying Can’t Make Me Quit Living  (Tony Nitti).  Inspiring and moving.

 

News you can use.  Book On New Jersey Wines Does Not Support Deducting Trips To France (Peter Reilly)

 

Her sister Everclear wasn’t implicated.  From nbc-2.com, Ft. Meyers:

A chance traffic stop on I-75 in Lee County uncovers a massive tax fraud scheme. Deputies say the woman accused used her job to steal personal information – even stealing from people who were dead.

Thursday, 23-year-old Tequila Gordon was sitting in the Lee County Jail. Her bond was set at $72,000. 

Prosecutors say she worked at liberty tax services in 2009 and stole personal information from dozens of people.

I would think having a first name of “Tequila” would make getting a good job challenging.  It won’t be any easier now.

 

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Tax Roundup, 5/9/2013: Gotta start somewhere edition.

Thursday, May 9th, 2013 by Joe Kristan

rand paulGotta start somewhere.  The Hill reports “Rand Paul introduces bill to roll back parts of tax evasion law“:

“FATCA’s harmful impacts cover the spectrum,” Paul said. “It is a violation of Americans’ constitutional protections, oversteps the limits of Executive power, disregards the mutual respect of sovereignty among nations and drains money from the federal treasury under the guise of replenishing it, and discourages overseas investment in the United States.”

“Tax evasion is a problem that should be addressed, but not in such an egregious way,” Paul added.

FATCA has made normal financial life difficult or impossible for many Americans abroad.  Too bad politicians didn’t think of these things before they voted.

Probably related: Lynnley Browning, U.S. Citizens Ditch Passports in Record Numbers (via the TaxProf).  Also this from Phil Hodgen.

Jack Townsend, HSBC India Reported to be Cooperating with DOJ and IRS and Projecting Significant Penalty

 

TaxGrrrl,  Sanctions May Be Least Of ‘Copyright Troll’ Worries As Matter Is Referred To Feds, IRS.  A great article telling the story of an attorney/copyright troll who annoyed a judge enough to get him to call in the IRS to investigate his taxes.  Hilarity ensues.

Cara Griffith, Pot Calling Kettle Black? (Tax.com):

Good Jobs First is just hiding the ball a little bit by trying to get rid of reports on business climate. The Good Jobs First report says that the real issue we should be focusing on is “how to build a tax system that is fair, modern and relevant.” Yes, that’s exactly what needs to be done, but I would argue that reports on business climate add to the debate. And while I do think that such reports must be examined with a critical eye, “business climate” matters.

Related Tax Update coverage here.

 

Tyler Cowen

“When economists are not listened to, that often means strong special interests and/or strong voter sentiment stand on the other side of the equation.  The numerous special deductions in the tax code, most of which have no efficiency justification, are examples.”

True of both federal and Iowa tax laws.

 

Brian Strahle,  MARKETPLACE FAIRNESS ACT:  IMPACT ON NON-INTERNET REMOTE RETAILERS?

Hence, it appears that this Act would apply to any business (not just Internet Retailers) that makes sales into a state in which it does not have nexus.  Therefore, manufacturers or other non-Internet retailers who sell directly to retail customers who do not have sales representatives or any other physical connection with a state may (under this Act) be required to collect sales tax on its remote sales.

It’s not just the e-Bay sellers who would have to deal with this.  If you really want to create “market fairness,” there are two ways that are much simpler: either a straight national sales tax collection regime with uniform rules and rate where the proceeds are allocated to the states based on the sales to the state, or a sales tax based on shipping location.

 

Janet Novack,  Reverse Showrooming: Best Buy, Amazon And The Internet Sales Tax:

Traditional bricks and mortar retailers squander their immediacy edge with indifferent/uninformed sales help, who look even worse compared to the information now available on the web. But they can do well if they integrate their online and in-store services, carry enough inventory and price competitively.

 

Christopher Bergin, No Use for Useless Stances (Tax.com)

Linda Beale,  Senate did the right thing–will the House?

 

Tony Nitti, Boxer Manny Pacquiao Ducks U.S. Taxes, Will Return To Ring In China

Paul Neiffer,  Make Sure to Coordinate Estate Documents with Ag Laws

Kay Bell,  It’s property tax appraisal, and scam, time

 

It’s great to waste money, as long as it’s wasted here.  I dust off my old personal rant blog in response to this.

Going Concern, Groundbreaking CFO.com Survey Reveals Accounting Professionals Desperately Need Communication Skills.  All I can say to that is, pprdrhnt.

 

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Tax Roundup, 4/24/2013: Maxed Out. And: Internet sales tax vote looms.

Wednesday, April 24th, 2013 by Joe Kristan
Max Baucus

Max Baucus

Depart, I say; and let us have done with you. In the name of God, go!  Chief Senate taxwriter Max Baucus won’t run for re-election.  (Dealbook, via Going Concern).

Sen. Baucus has been either chairman or minority leader of the Senate Finance Committee for decades, and along with his partner in crime, Sen. Grassley, he bears great responsibility for the nightmare the tax law has become, including Section 409A, the Net Investment Income Tax, The First Time Homebuyer credit, Section 199… Good-bye, before you wreck any more trains.

Related:

Linda Beale, Baucus Will Not Run in 2014  (yay!)

Kay Bell,  Senate Finance Committee chairman’s coming retirement could shape tax reform

 

Congratulations to Paul Caron, proprietor of the TaxProf Blog, on his move from Cincinnati to Pepperdine in Southern California.

 

Kyle Pomerleau,  No Surprise: The Overly Complex EITC is Plagued with Billions of Dollars in Improper Payments (Tax Policy Blog)

Patrick Temple-West, Obama budget taxes more Americans, and more

Tony Nitti, Quantifying The Recent Tax Increases: What Is A Wealthy Taxpayer’s “Fair Share?”  As far as some people are concerned, it’s always more than they are paying.

 

Daniel Shaviro,  Senate vote on the “Marketplace Fairness Act”

Howard Gleckman,  Five Things You Should Know About the Online Sales Tax Bill (TaxVox).  He thinks it’s just lovely.

Joseph Henchman,  Senate Voting This Week on Expanding State Authority to Collect Internet Sales Taxes (Tax Policy Blog)

Clint Stretch,  Getting It Wrong: Energy Tax Policy (Tax.com):

Winston Churchill said that Americans can be counted on to do the right thing, after we have exhausted all other possibilities.  He might have added that we usually start with the least direct and most complex approach.  So it is with the energy tax policy expressed in President Obama’s FY 2014 budget.

I like this sentence: “By their nature, tax credits add complexity to the law and often reward behavior that would occur even without the credits.”

 

Robert D. Flach asks, DIRECT DEPOSIT – IS THERE A PROBLEM?

So far two clients have contacted me to report an issue – one with a 2011 refund andone with a 2012 refund.  In both cases the refund was not directly deposited to the requested account.  Instead it was applied to the subsequent year’s estimated tax.  It was as if the taxpayer, or I, had entered the full amount of the refund on Line 75, although we clearly did not.

This isn’t a problem I have seen.  Robert famously doesn’t e-file his returns.   I wonder if it’s a simple keypunch error at the service center.

Jason Dinesen,  In a Same-Sex Marriage? Watch Your Federal Tax Withholding

Jim Maule, Putting It in Writing Makes Good Tax Sense.  If you use the right words, of course.

Peter Reilly, How To Shatter The Public Accounting Glass Ceiling ?  Sometimes I think it’s that women see the hours and stress involved and wisely say “screw this.”

 

TaxGrrrl, Ready Or Not: Lauryn Hill Sentencing For Tax Evasion Postponed

Tax Trials,  Tax Court: Second FPAA Invalid, Cannot Confer Jurisdiction

Robert D. Flach is buzzing again!

 

I love my hometown: Elvis impersonator engages police in 30-hour standoff in Des Moines (RawStory.com, via The Beanwalker)

Stoned people should not throw glass bongs in houses.  Glass bong breaks two state windows (Jason Clayworth)

 

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Tax Roundup, 3/6/2013: Tax return numerology, and similar economic development science. Plus rapper tax tips!

Wednesday, March 6th, 2013 by Joe Kristan

20130306-1Tax tip: IRS doesn’t buy this numerology stuff.  A strange story out of New York:

A tailor who counted star athletes including Rickey Henderson and Wilt Chamberlain among his clients has pleaded guilty to skirting about $2 million in sales and income taxes.

Mohanbhai Ramchandani pleaded guilty on Tuesday, state Attorney General Eric Schneiderman said. His company, Mohan’s Custom Tailors Inc., also has had local stars Patrick Ewing and Darryl Strawberry among its clients and made an appearance on Bravo’s “The Real Housewives of New York City.”

The charges say that he failed to pay $1.7 million in sales taxes starting in 2001, and he failed to pay $256,000 of income taxes from 2007 through 2009.  I didn’t know tailoring could be so lucrative.  But this is unusual:

Authorities said a whistle-blower first raised concerns over Ramchandani’s tax practices. They said one indication of fraud was the use of numbers on his tax forms that added up to multiples of 10, an outgrowth of his belief in numerology.

Once in a while you prepare a return that happens to foot to a round number somewhere.  It looks funny, but it will happen occasionally just by chance.  But when they are all round, apparently the tax people might notice.

 

As strange as Mr. Ramchandani’s approach to numbers is, Iowa gives him a run for his money.   Iowa’s lead tax credit pusher, Debi Durham, has issued a press release touting the economic wonders of enormous tax credits granted Orascom, an Egyptian company, to build a fertilizer plant in Southeast Iowa.  The release bases its conclusions on ” the Regional Economic Modeling Inc. (REMI) analysis for the Iowa Fertilizer Co. project.”  From the release:

“The  REMI analysis of the Iowa Fertilizer Co. project speaks for itself,” said Debi Durham, director of the Iowa Economic Development Authority (IEDA).  “On the front end, Iowa Fertilizer Co. will inject $1.4 billion of capital investment into our state and create at least 165 permanent jobs and thousands of construction-related jobs.  Now we know that the benefits of that project will serve Iowans for years to come.”

It speaks for itself and it says nothing.    It says nothing about whether the project would have gone ahead without the credits, but Iowa’s claims that Illinois was hot after the plant with its own incentives lack credibility.

The analysis really betrays itself by omitting two key words: “opportunity cost.”  It claims every projected benefit from the project without asking whether any benefits would be available if the money were used for something else.  It certainly doesn’t say what Iowa loses by having a complex tax system with high rates to pay big subsidies to the well-connected.

I’ve said it before: using taxpayer money to lure businesses is like a guy taking his wife’s purse to the bar to buy drinks for the girls.  It’s not impressive.  They might let the guy buy the drinks, but they realize he’ll treat them like he is treating his wife if he gets the chance.  And anybody he goes home with isn’t likely to be much of a prize.

 

Egypt taking a different approach to Orascom.   The Orascom executives do better in Iowa than back home, reports SiouxCityJournal.com:

An Egyptian billionaire behind one of the largest and most controversial projects in the state is being investigated for tax evasion and has been barred from leaving his country.

According to an article published Tuesday in Construction Week Online, Orascom Construction CEO Nassef Sawiris and his father, Onsi Sawiris, are barred from travel until a resolution is reached regarding the sale of an Orascom subsidiary and the taxes from that sale.

As hard as it is to deal with Iowa and federal tax authorities, they are probably downright reasonable compared to Egyptian revenuers.  I suspect that the “resolution” being sought is much like that sought by a kidnapper.

 

The TaxProf links to this from the New York Times Dealbook: Why Carried Interest Is a Capital Gain.  It is as good an explanation as I’ve seen of why capital gain on private equity isn’t a crime against humanity:

Typically private equity investors are paid a 2% management fee, on which they pay ordinary income tax rates, and a 20% carried interest of the partnership’s profits that is only paid after limited partners receive a preferred return of 8%.

Carried interest, therefore, is the profits share on the sale of a capital asset and not “ordinary income” as some would have it treated.  In other words, it is a capital gain within a partnership and is rightfully taxed at the long-term capital gains rate  — provided that  the asset, or company, is held for more than one year.

The underlying principle is no different than two friends who partner together to purchase a restaurant.  One might bring capital and the other brings expertise.  The restaurant could be in disrepair or a great concept that needs additional capital to expand.  The chef identifies the restaurant to buy and possesses the skills to manage the restaurant and add value to the enterprise over time.  The friend has the capital to invest, but doesn’t possess the operational or investment skills to generate a return.

When they sell the restaurant years later, both partners receive capital gains treatment on their long-term investment.  A private equity partnership works in the same way.  This is Partnership Law 101.

Exactly.  And it’s not like a salary, where somebody writes you a check.  The private equity investor is taking a risk, and on any given investment is likely to get nothing.  It’s not like, say, a tenured law school faculty paycheck that comes every two weeks.

 

 

It’s not just the rich guy?  Obamacare Tax Increases Will Impact Us All (Andrew Lundeen, Tax Policy Blog).

Howard Gleckman, Changing Government’s Inflation Measure Would Raise Taxes as Much as it Would Cut Spending (TaxVox)

Jason Dinesen,  Greatest Hits: Enrolled Agents, The Liechtenstein of the Tax World.  “When people hear ‘enrolled agent,’ they think either ‘what the hell is
that?’ or ‘he must work for the IRS, flee for your lives!'”

Anthony Nitti,  Business Owners Could Find Their Tax Deferral Backfiring.  Deferring income into higher-rate years works badly.

Russ Fox,  Did the IRS Write Law?  “I suspect the IRS has erred.”  I agree, the IRS can’t change statutory rates to deal with budget issues.

 

Jack Townsend,  Proposed New FBAR Form And Explanation

Brian Strahle,  Will Maryland Match Virginia’s Corporate Income Tax Rate?

Patrick Temple-West,  Tax-exempt bonds get scrutiny, and more

TaxGrrrl, Taxes From A To Z (2013): C Is For Carpooling

Robert Goulder, Will EITI Kill Transfer Pricing? (Tax.com).  First ask yourself: what is EITI?

 

David Brunori, Remember the Alamo, Buy a Gun (Tax.com)  On the unwisdom of sales tax holidays, even for guns.


ProTip: Don’t take your tax advice from rappers.  This from Going Concern:

As you might expect, TMZ has the scoop and it quotes a number of artists who are currently considering tips for strippers as a legit deduction and therefore a serious tax strategy. And who doesn’t love creative tax planning? But how might they rationalize this idea? 

Well, Bizzy Bone considers these young ladies to be like his family:

Bizzy Bone tells TMZ, “I’m giving charity to females who need their light bills paid.  So, of course, that’s a write-off.  You write off your kids, don’t you?”

Um, no.  Mr. Bone might want to ponder the stories of Ja Rule, Fat Joe, and Beanie Sigel, to name a few, before he gets too smug about his tax deductions.

 

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Tax Roundup, 3/5/2013: Good intentions, broken whistles. Also: file all the forms!

Tuesday, March 5th, 2013 by Joe Kristan

 

Swiss knife

“Ultimate Swiss Army Knife” image courtesy redjar under Creative Commons license.

The Iowa income tax as Swiss Army Knife.  The Iowa Senate Veterans Affairs Committee yesterday sent to the floor a proposal for up to $1,500 in tax credits for hiring an Iowa resident who is “a member of the national guard, reserve, or regular omponent of the armed forces of the United States” for a job of at least 30 hours a week.  The bill would also give an additional $500 tax credit for each year the employee is called to active service for at least 30 days.

SSB 1064 cleared the committee unanimously.  After all, who would vote against the “Hire a Hero Tax Credit?”  But this is a classic example of a feel-good tax provision that clutters the tax law, is very difficult to enforce, and would not accomplish enough to be worth the trouble.

Nobody will hire an employee just to get a $1,500 tax credit.  You hire somebody because you have work to do.  Because it’s so hard to find and keep good employees, you hire the person you think is most likely to work out; the cost of a hiring mistake can be a lot more than $1,500.  It will be hard to enforce — especially the provision saying the credit is unavailable if the new employee replaces another “eligible employee.”  Will the state really examine that?  Like many credits, it won’t change behavior; it will just be harvested by taxpayers who would have hired the same military people anyway.

Still, why not make a nice gesture to show our voters how much we care?  Because every feel-good tax break has a cost.  It costs money to comply with and enforce.  It also creates a new anti-tax reform interest group; any attempt to clear away expensive and ineffective tax breaks to make a better tax system for everyone will be fought by those few that collect it.  It makes a good tax system for everyone just a little bit harder.

The primary purpose of the tax law is to finance government operations.  When it become a Swiss Army Knife of public policy, it becomes a little less effective at its real job every time you add a new gadget.

 

Swiss Bank corpse fined $58 million for tax cheating.  The Wegelin Bank, which is closing as a result of its legal troubles, was sentenced yesterday to pay a $58 million tax evasion fine for helping clients evade U.S. taxes.  Robert W. Wood has more.

Patrick Temple-West,  Wegelin withers under U.S. tax scrutiny, and more (Tax Break)

 

While whistleblower Bradley Birkenfeld had a big role in bringing down the Swiss bank tax evasion industry, the IRS continues to resist paying out whistleblower awards.  While Mr. Birkenfeld scored $104 million for his snitching, Lynnley Browning reports that the IRS remains loath to pay for information:

In January, Sen. Charles Grassley, the 79-year-old Iowa Republican, chastised acting IRS commissioner Steven Miller over his recent proposal to restrict the agency’s whistleblower program, already an object of criticism since its creation in 2006. The proposed curbs, Grassley wrote in a letter to Miller, showed one thing: that the IRS and its boss, the Treasury Department, “view whistleblowers with hostility.”

What exactly is at issue? The current whistleblower rules say a tipster can collect a reward of 15%-30% of proceeds brought in as a direct result of a tip. The dirt has to involve tax evasion of at least $2 million or tax fraud by an individual making at least $200,000 a year.

Miller’s proposed restrictions will likely shrink payouts. Among the curbs: making it nearly impossible for whistleblowers to share in rewards stemming from a company’s inflation of losses, and excluding from rewards any money brought in from so-called Fbar fines.

Apparently the IRS would rather spend its time making experienced preparers take stupid open book tests for permission to continue what they have been doing for years than to actually pursue tax cheats. Only two whistleblower claims have been paid out, but the IRS feels it has plenty of time and resources to appeal the shutdown of its preparer regulation program.

 

William McBride, How do Taxes and Spending Affect Economic Growth? (Tax Policy Blog)  “The worst option of all, according to a huge preponderance of evidence, is to replace the sequester spending cuts with higher income taxes.”

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Russ Fox,  IRS Opens for All.  We can e-file all the forms.

TaxGrrrl,IRS Now Accepting All Individual Returns

Paul Neiffer,  IRS Announces They Are Processing All Remaining Tax Forms

Jeremy Scott, Is the U.S. Tax Gap as Big as Italy’s?  (Tax.com).  “But numbers from a New York Times article about Italian tax evasion suggest that the United States isn’t doing much better than one of Europe’s most notoriously inefficient tax collectors.”

Jack Townsend, Second Circuit Holds That Fraud on the Return — Even If Not the Taxpayer’s — Causes an Unlimited Civil Assessment Statute of Limitations to Apply

Linda Beale,  Jenkins & Gilchrist attorney sentenced to 8 years for tax shelter work

Yes.  Minnesota Tax Reform:  Poorly Designed??  (Brian Strahle).

Kay Bell,  Tax Carnival #114: March 2013 Tax Lions and Lambs

 

Good.  Pennsylvania Is Trying to Ditch the Attest Hour Requirement for New CPAs (Going Concern).  If you want to do tax work for a living, why waste two years doing audit work that you hate?

I don’t condone the behavior, but I bet every bus driver dreams it.  From WQAD.com:

Two Iowa bus drivers lost their jobs after being accused of racing school buses filled with students.

According to police the two drivers were returning with students from a Valentine’s Day field trip when one driver turned the ride into a race.

The students were first graders from Iowa Falls. Nobody was hurt.

I might not make a very good bus driver.  I’d probably always be racing…

 

 

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Tax Roundup, 2/26/2013: A map of state tax futility. And why bankers don’t like OREOs.

Tuesday, February 26th, 2013 by Joe Kristan

Close enough to zero. Monday Map: Corporate Income Tax Revenue as a Percentage of All State/Local Tax Revenue (Nick Kasprak, Tax Policy Blog):

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IRS Field Attorney Advice: Bank must capitalize indirect costs of holding “OREO” property under inventory capitalizetion rules.  From FAA  20123201F (my emphasis)

Section 263A applies to property that is acquired for resale. If § 263A applies, the taxpayer must capitalize both the direct costs of acquiring the property and the property’s allocable share of indirect costs.

In this case, X clearly acquires OREO in foreclosure (or in lieu of foreclosure) with an intent to resell the property. Bank regulators restrict the holding period for OREO and expect banks to exercise good faith efforts to sell the property. As required by applicable state and federal policies and regulations, it is our understanding that X advertises its OREO properties for sale, including those properties which it rents out. X’s Year6 Annual Report confirms that assets acquired through (or in lieu of) foreclosure are held for sale. In addition, OREO is acquired and held in the ordinary course of X’s trade or business. X’s Year6 Annual Report acknowledges as much when it states that X may foreclose on and take title to properties securing loans “during the ordinary course of business.” X engages in OREO transactions with frequency, regularity, and according to an “OREO disposition strategy.” (Year6 Annual Report, p.17). Thus, the OREO held by X constitutes property held by the taxpayer primarily for sale to customers in the ordinary course of its trade or business.

“OREO” is “other real estate owned,” for you non-bankers.  Bankers don’t care to hold much of that.

 

Joseph Henchman,  Nebraska Governor Withdraws Tax Reform Proposal; Legislature Look to Commission to Develop Alternatives (Tax Policy Blog).  But they aren’t giving up on tax reform.  So should Iowa.  The Quick and Dirty Iowa Tax Reform Plan is tanned, rested and ready!

Paul Neiffer,  Must Have W2 Wages to Deduct DPAD.  A hidden tax trap for the Schedule F farmer.

 

Great minds think alike:

TaxGrrrl,  How Will Your State Be Impacted By Sequestration?

Kay Bell,  How would your state fare under sequestration?

 

TaxProf,  3d Circuit Denies CARDS Tax Shelter.  Another turn-of-the-century tax shelter fails.

Elaine Maag, Education Tax Credits Rival Pell Grant Program in Size: Reforms Proposed (TaxVox).  The more you subsidize it, the more it costs.

Jeremy Scott, Taxing the Rich, Thenardier-Style (Tax.com):

But the influence of Les Miserables doesn’t just extend to the silver screen and stage. President Obama seems to be taking tax policy advice from the musical’s comical antagonist, Thenardier.

Well, that would explain many things.

Trish McIntire,  Referrals – A Double Edged Sword.

Peter Reilly,  What Were They Thinking ?   Another example of the unwisdom of failing to remit payroll taxes.

Linda Beale,  Private equity and real estate managers get a “costly and unjust [tax] perk”.  Not really, but some people really hate carried interests.

Me: Identity theft tax fraud: women’s work?

 

Put the champaign back on ice.  The Income Tax is NOT Turning 100 – Yet. (Joseph Thorndike, Tax.com).

One less metal home in town.  Demise of Another Lustron House.  (IowaBiz.com) These are funky steel houses, not mobile homes.  They don’t build ‘em like that anymore.

 

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

Thursday, February 7th, 2013 by Joe Kristan

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

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

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

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

– IRA charitable distributions up to $100,000

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

– The optional deduction for state and local sales taxes.

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

 

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

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

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

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

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

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

 

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

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

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

 

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

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

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

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

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

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

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

Try telling that to Iowa.

 

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

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

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

 

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

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Tax Roundup, 2/6/2013: 4.5% Iowa tax? Flat chance. And hidden dangers of an IRS exam.

Wednesday, February 6th, 2013 by Joe Kristan

20130206-1Shock!  David Osterberg doesn’t like the 4.5% flat Iowa Income tax proposal!  State Tax Notes tracked down former Senate Candidate and Cornell College Econ Prof* David Osterberg for his views on the proposal to create a flat 4.5% income tax in Iowa alongside the current income tax.  Not surprisingly, he doesn’t like it ($link):

     The founder and executive director of the Iowa Policy Project said a Republican-sponsored House bill to create a flat personal income tax option would shift more of the tax burden to low-income residents.

     But David Osterberg said he is not too concerned because he doesn’t think the proposal has a shot at passing the Senate, where Democrats hold a majority…The proposal is “part of this ideology that says we somehow have to take  care of the top 1 percent and things will be good,” Osterberg said. “I don’t think low-income people believe that — we sure don’t.”

State Tax Notes also tracked down Tax Foundation Economist Elizabeth Malm:

     “Iowa’s current income tax system has nine brackets, with rates ranging from 0.36 percent of income to 8.98 percent of income,” Malm said in an e-mail to Tax Analysts. “In 2012, this made Iowa the fifth highest top income tax rate in the country, among those states that levy PITs.”

     Without additional information, Malm declined to say whether the plan is regressive. She did say, however, that the proposal would fail to simplify the tax code because it keeps the current system intact.

     “I’m guessing the rationale behind allowing taxpayers to choose between the two systems is to ease concerns that the flat 4.5 rate would hit low-income individuals harder,” Malm said.

Wrong guess.  The rationale is almost surely to avoid provoking the powerful lobby group Iowans for Tax Relief, which holds sacred the current Iowa individual deduction for federal taxes paid.  Proposing the flat tax as an alternative, rather than a replacement, finesses that problem — but at the cost of adding more complexity.  In this form, the flat tax is what I call an “Alternative Maximum Tax.”

*Disclosure: I once borrowed his shotgun at Cornell.  It had dust bunnies in the tubes.

 

David Brunori, Who Pays? Who Cares? You Should (Tax.com):

No matter your views on government, there is no justification for asking the poor to pay more than the rich. I do not favor dramatically increasing the tax burdens on the wealthy, particularly income tax burdens. But there are a lot of policies that can be enacted that could even the playing field. Broader base consumption taxes, less reliance on excise taxes, and larger income exemptions for low wage taxpayers would go a long way.

None of these are incompatible with lower top tax rates.

Tracy Gordon,  The Downside of States as Laboratories for Tax Reform (TaxVox)

 

Needed, but impossible.  Tax Notes has a sad-but-true headline that brilliantly summarizes the state of our national tax policy: Urban Institute Panelists Agree Tax Reform Necessary but Unlikely. ($link)

Linda Beale, More on PTINs for previously unregulated tax return preparers:

We have seen considerable evidence of tax return preparers who do not understand the tax laws or who intentionally misapply them (in the home office deduction, etc.).  It is imperative that those who assist others in preparing tax returns demonstrate minimal competency in the tax law as demonstrated by the qualifying exam.

The “qualifying exam” is open book — really more of a literacy test.  The IRS can make preparers show they can read.  They can’t make them competent.  When you consider the Big 4 tax shelter scandals, and the hopeless complexity of the tax law, it’s funny to say that the problem is really “people who do not understand the tax laws.”

 

Peter Reilly, Future Baseball Commissioner Tackles Tax Laws As Complex As Infield Fly Rule

Tough tax return choice for 2012: Pay more now to save later?  My new post at IowaBiz.com, the Des Moines Business Record Blog for Entrepreneurs, discussing whether maximizing 2012 deductions is really a good idea.

Jason Dinesen, Taxpayer Identity Theft — Part 12 .  More Kafkaesque obstacles to resolving an identity theft for his client.

William Perez, IRS Provides Further Disaster Relief for Hurricane Sandy

Kay Bell, Tax Carnival #112: Super Bowl of Taxes

Jim Maule, Tax Ignorance As Persistent as Death and Taxes

Missouri Tax Guy:  Missouri does not mail  Form 1099-G.  You have to get it online.  One more little blow to tax compliance for small taxpayers.

Trish McIntire, Low Cost Tax Preparation Options

TaxGrrrl,  U.S. Postal Service To Eliminate Saturday Delivery: Will It Save Tax Dollars?  Next they’ll shut down the Pony Express.

Patrick Temple-West, Waiting on the phone for the IRS, and more (Tax Break)

Ellen Kant, William McBride, Super Bowl Tax Bill (Tax Policy Blog)

Russ Fox,  Will the Third Time be the Charm for Appeals?  A case where the “independent” IRS appeals function failed twice.

Howard Gleckman, Can the Income Tax Fund the Government We Want?  (TaxVox).  I can’t speak for “we,” but it could easily cover all of the government I want.

 

The Critical Question: Et Tu, Sarkozy? (David Goulder, Tax.com)

If they can spell their address, tax cheating should be easy for them: Massapequa Restaurant Owners Sentenced for Tax Fraud (Massapequa Patch).

Isn’t that conspiracy?  Tax fraud: We have a plan, authorities say (Myfoxtampabay.com)

Screwed either way.  Taxpayer Sues IRS, Claims Agent Coerced Him Into Having Sex to Avoid Adverse Audit  (TaxProf).

 

But not hotirsagent.com?  I guess there really are stupid easy ways to earn internet money.  A Kansan found one, but then got in trouble by not paying his taxes.  KFDI.com reports:

Dallen Harris, 39, pleaded guilty to one count of tax evasion. He reported a taxable income of a little more than $164,000 in 2010, when it was actually more than $1 million. 

Harris’ income came from Internet domain names, according to court ecords from a related civil forfeiture case in federal court. The government is seeking to forfeit Harris’ houses, cars and bank accounts in that case. The domain names included celebritysextape.tv, adultkingdom.net, Porntesters.com, hardcorefilms.tv, celebritynakedpic.com and sextape.com. 

No, I won’t link to any of those.  It doesn’t sound like they need any help generating traffic anyway.

 

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Tax Roundup, 2/4/2013: District Court declines to stay decision stopping IRS preparer rules. And ___ Anniversary!

Monday, February 4th, 2013 by Joe Kristan

20130121-2Not surprisingly, the judge who ordered the IRS to shut down its preparer regulation program declined to stay his order.  The IRS asked James Boasberg, the U.S. District Court Judge who ordered the IRS to stop its preparer regulation program, to stay his order pending an appeal.  The judge declined:

As the factors beyond likelihood of success do not decisively tilt in favor of the IRS — indeed, they tip somewhat against — the Court sees no basis to lift its injunction pending appeal. Nor does the Court believe it warranted to suspend the injunction for fourteen days to permit the IRS to seek a stay in the Court of Appeals. This would only lead to more confusion for preparers and their clients as the tax season gets underway. While nothing in this decision prevents the IRS from seeking such relief there, the Court sees no benefit of a brief stay while it does so.

So where do things stand?  The IRS will be allowed to continue to administer the Registered Tax Return Preparer test and issue PTINs, but it cannot require RTRP tests or CPE, or collect fees for them.  Whether the IRS will continue testing on a voluntary basis, or whether there will be takers, remains to be seen.

More coverage from TaxGrrrl: IRS Loses Big In Court (Again), Tax Season Chugs Along; and Russ Fox: IRS Loses Again to Institute for Justice.

 

You surely didn’t miss the 100th anniversary of the 16th Amendment yesterday.  They had a football game and everything to observe it.  The 16th Amendment, which gave rise to the current income tax, was ratified by Delaware on February 3, 1913, making it official.  And yes, it is official.  While some tax protesters insist that the 16th Amendment was never properly ratified, all the federal judges say otherwise — not to mention the folks at IRS, the U.S. Marshals Service and the Bureau of Prisons.  So, in any way that matters, it’s official.  Still, I can’t bring myself to say “Happy” anniversary.

More from Richard Morrison:  100 Years of the Federal Income Tax (Tax Policy Blog)

 

Iowa’s oldest judge, age 90, steps downRuth Klotz, a Polk County Probate Judge, remains respected by the lawyers I know who practiced in her court.   Happy Retirement, Judge Klotz!

 

Paul Neiffer,  Many States Are Delaying Farmer Filing Deadline

Jack Townsend, UBS Depositors Fail on Pleadings in Civil Case Against UBS

Kay Bell, Tips are taxable income

TaxGrrrl, Pay Taxes On Your Super Bowl XLVII Winnings? You Can Bet On It

Trish McIntire,  Gambling 1099MISCs.  They don’t make your winnings taxable, they just let the IRS in on the secret.

Patrick Temple-West,  Early payouts of dividends, bonuses spur a windfall, and more (Tax Break)

Martin Sullivan, Is Aggressive Tax Avoidance Moral? (Tax.com).  Strange question.  If you are paid to maximize shareholder returns, is it moral to do less than your best to do so?

Rudy Penner,  The Risks of Dumbing Down Fiscal Goals (TaxVox).  It’s hard to think they could get any dumber than they are now.

 

Jim Maule,  Looking Again at Tax and Political Ignorance:

The study’s conclusion is disheartening. The authors conclude that incumbents can get themselves elected by associating themselves with good news for which they ought not take credit because they are not responsible, support policies that generate good news for their districts even if they are bad for the nation, and to use rhetoric to distract voters from the incumbents’ histories.

Perhaps this will lead the good Professor to reconsider his preference for government solutions over market outcomes.

Linda Beale,  Red state tax “reform” and “economic growth”

Robert D. Flach, JUST ONE MORE THING, HE SAID COLUMBO-LIKE

 

The Critical Question: The Devil Wears Prada, But Does Her Boyfriend Pay Taxes? (Robert Goulder, Tax.com).

What this country needs is a good 25-cent sneaker.  Illinois Proposes 25-Cent Sneaker Tax (TaxProf)

It’s the little things.  The mark of a true craftsman is attention to detail.  Two Ohioans’ alleged failure to mind the details has led to trouble.  From the Columbus Dispatch:

Roma L. Sims, 34, and Samantha C. Towns, 30, were arrested on Thursday and charged with aggravated identity theft, conspiracy and wire fraud for using the identities to file tax returns and rake in $1.3 million.

But they misspelled several cities when they listed return addresses: Louieville and Pittsburg, according to the criminal complaint. Those geographic goofs caught the attention of investigators.

So did misspelling some of the occupations they listed on the phony tax returns.

I bet they thought those spelling drills in grade school were pointless.

 

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Tax Roundup, 12/17/2012: Ames! And fixing the cliff by fudging withholding.

Monday, December 17th, 2012 by Joe Kristan

The expectant crowd gathers in Ames, Iowa for the final 2012 session of the ISU Center for Agricultural Law and Taxation Farm and Urban Tax School. 

 20121217-1

350 practitioners are signed up, and the coffee’s on!

20121217-2 

Fiscal Cliff Notes

 Because writing big checks in April is always popular.  A few commenters have said that the Treasury Secretary can prevent Fiscal Cliff disaster by just setting the withholding tables to pretend that the tax law isn’t changing January 1.  Marie Sapirie of Tax Notes says it’s not that simple ($link)

Commentators have suggested that Geithner may even be able to prospectively implement the administration’s policy of raising taxes on taxpayers making more than $250,000 per year by increasing withholding only on income above that level. That is almost certainly wishful thinking. Whatever the “most appropriate” amount of withholding to reflect the tax rates in section 1 may be, section 3402(a) does not give the Treasury secretary the power to create withholding tables that have no basis in current or recently expired law.

Of course Secretary Geither hasn’t always been big on following the tax law.

TaxProf,  NY Times: Itemized Deduction Cap: Popular, But Unfair 

KayBell,   National Taxpayer Advocate Nina Olson discusses fiscal cliff tax complications

TaxGrrrl,  Budget Resolution May Come Down To One Question

Steven Rosenthal,  Paying Taxes on Capital Gains Early: How Investors are Avoiding Tax Hikes (TaxVox): “All of this planning suggests that sophisticated taxpayers are outracing Congress again.” 

Nick Kasprak,Alternative Minimum Tax Increase Looming Over Fiscal Cliff Negotiations (Tax Policy Blog)

Robert D. Flach,  WHAT FOOLS THESE POLITICIANS BE!

Remain calm, all is well.  Deficit Hysteria and Debt Denialism (Joseph Thorndike, Tax.com)

 

TaxProf,  Sullivan: Why the SALT Deduction Is Always Under Attack

Megan McArldle discusses an interesting pension funding approach:

Big news in pensions today: Silverdex, a major US-based conglomerate with fingers in just about every economic pie, from mining to solar cells, turns out to have been stuffing its main pension fund full of… it’s own corporate bonds

Just kidding. 

I don’t really know how to say this, but sorry, I lied a little bit.  I’m not talking about a private company at all, because of course, if a private company did this, it would be completely and totally illegal.  Regulators would have shut this down decades ago and probably at least a few lower-level executives would have spent a little time in the pokey.  Instead this is, of course, a description of how the United States Social Security “trust fund” works.

Like so many things: private sector does it, it’s scandal and ruin.  Government does it, it’s Tuesday.

Courtney A. Strutt-Todd,  Tax Law Blog: Attacks on the Exemption for Municipal-Bond Interest and Why it is Important to the Average Taxpayer (Davis Brown Tax Law Blog)

Paul Neiffer,  Another Nice Feature of a Living Trust

Brian Strahle,  D.C. Combined Reporting: How Much Will it Cost Your Company?

Missouri Tax Guy,   Capital Gains, What you need to know 

Trish McIntire links to the annoying new 2013 EIC Interview Sheet, so practitioners can double up as welfare caseworkers.

Russ Fox,  What Happens When Cigarette Taxes go Through the Roof?

Martin Sullivan,  Capital Gains Frustration for Tax Reformers (Tax.com).  His “reformers” want to increase the problems inherent in capital gains taxes by increasing them.  May their frustrations endure.

The Critical Question:  Naming Spousal IRAs After Senator Hutchison – Is That A Priority ?  (Peter Reilly)  I still think Roth & Company should get royalties for the Roth IRA…

Linda Beale,   Goggle’s Bermuda hideaway/HSBC’s too-big status: time to rein in the corporations!  Too big, eh?  Google’s entire market capitalization is about $234 billion this morning.  That’s how much the federal government spends in 23 days.  And it’s Google that’s too big? 

 Sorry, I think there’s already a mortgage on it.  A New Way to Reduce Our National Debt — Sell Alaska. (Greg Mankiw)

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Tax Roundup, 12/4/12: Lohaus rejected. So is GOP cliff proposal.

Tuesday, December 4th, 2012 by Joe Kristan

Iowa Department of Revenue blocks Lohaus shot at refund.  Ex-Iowa basketball star Brad Lohaus is remembered for, among other things, taking a ball in the face while guarding against an inbounds pass.  That feeling might have come back when Mr. Lohaus was recently denied a tax refund by the Department of Revenue.

According to a newly released letter denying a protest filed by Mr. Lohaus, he didn’t get around to filing Iowa income tax returns for 2001 through 2005 until July 2010.  The department of Revenue began collection action, including wage garnishment, in 2007.  The returns filed in 2010 showed some overpayments, but the Department denied refunds on the grounds that the statue of limitations had expired.   From the protest denial letter (my emphasis):

In their protest, taxpayers raise the following points to support their position.

1.  The Department did not notify them that there was a one-year statute of limitations at the time the wage garnishment began.

2.  Normal Iowa taxpayers have no way of knowing the rule of the one-year postdate matter with the Department disclosing the implication of the effects of lost payments.

3.  Taxpayers filed their returns in good faith that the Department would refund any overpayments of the garnished funds to them.

4. Due to the trust the taxpayers had in the State of Iowa together with personal circumstances, taxpayers are petitioning that the Department refund overpayment of $36,379.66 to them.

Pro tip: never trust the State.  Especially when the rules are on their side.  From the denial letter:

Telephone conversations with Mr. Lohaus show that he was repeatedly advised to file returns.  These returns were not filed with the Department until July 12, 2010. 

 Notification of the statute of limitations concerning Iowa income tax refunds is found in both Departmental rule 701 IAC 43.3 (8) and Iowa Code §422.73.  Both the Iowa Code and the Department’s administrative rules are published and available for public review.  Every citizen is presumed to know the law. 

The statute on refunds in Iowa reads:

A claim for refund or credit that has not been filed with the department within three years after the return upon which a refund or credit claimed became due, or within one year after the payment of the tax upon which a refund or credit is claimed was made, whichever time is the later, shall not be allowed by the director.

The taxpayer was eligible for amounts garnished within one year of the filing, but not older payments.

The moral?  File your returns, even if you have an overpayment.  If you let the statute of limitations expire, they get to keep it.  And they don’t have to warn you that they will.

 

TaxProf,   IRS Releases 159-Page Proposed Regs on New ObamaCare Medicare Taxes.  Just in time for me to teach them to the Iowa Bar tax school Thursday.  Thanks, IRS.

Paul Neiffer,  IRS Issues Proposed Regs on 3.8% Medicare Surtax

Anthony Nitti,   The Elf On A Shelf Will Haunt Your Kid’s Dreams, And More Thoughts On The Obamacare Investment Tax

 

White House rejects GOP fiscal cliff counteroffer (AP)

Wrong. They feel they need a distraction.  Democrats Needlessly Insisting on Rate Hikes (Martin Sullivan,  Tax.com)

Concern Trolling:  Why the Tea Party Is Bad for Conservative Tax Policy(Jeremy Scott, Tax.com).   When you see Todd Akin listed as a Tea Party candidate (he was more a creature of the social conservative wing of the GOP, not the Tea Party wing), somebody is being lazy.

Linda Beale,  Republican “fiscal cliff” proposal

 

Please please please:    Ohio Considers Changes to Complex Municipal Tax Codes(Julia Morriss, Tax Policy Blog)  If you have to have something as stupid as a municipal income tax, at least do it like Iowa, as an add-on to the state filing.

Please no!  It’s Beginning to Look a Lot Like… Tax Season (Trish McIntire)

Kay Bell,   Tax moves to make in December 2012

While doing their best to prevent them:  France Struggles to Tax Corporate Profits (Robert Goulder, Tax.com)

Actually, writing big checks can cause poverty, for those writing them.   There’s More To Fighting Poverty Than Writing Big Checks And Claiming Tax Deductions  (Janet Novack)

Robert D. Flach posted his Saturday Buzz right on time over  the weekend.  Catch it!

Maybe people could file forms reporting their fraud so they can measure it?  IRS Tax Fraud On The Rise But Actual Size Of Problem Hard To Pin Down: Report (Huffington Post)

Muskrats exempt from service on this jury.   Jury selection to begin in Beavers tax evasion trial

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Tax Roundup, 11/23/2012: Black Friday edition!

Friday, November 23rd, 2012 by Joe Kristan

Most people aren’t working today, as they are too busy spending like there’s no tomorrow.  But the Tax Update, between the first round of turkey and today’s round two, has much to be thankful for.

I am thankful I don’t have 50 employees. From Jillian Kay Melchior at The Corner we get this great graphic that shows how Obamacare penalties may make you regret that 5oth hire:

 

I am thankful to the TaxProf for highlighting David Bernstien’s Buffet Tax Resolution:

(1) Whereas, the U.S. government is in desperate need of revenue.

(2) Whereas, Warren Buffet is worth tens of billions of dollars, almost all of which is destined for private foundations and thus will completely escape federal tax.

(3) Whereas, Warren Buffet has publicly proclaimed that he is undertaxed.

(4) Resolved, the U.S. government should pass legislation that gifts to foundations in excess of a $20 billion lifetime exemption will hereinafter be taxed at 55%, the normal inheritance tax rate.

Fairness, Warren, fairness!

 

I am thankful that Megan McArdle, who (deservedly) has a much bigger audience than the Tax Update, has posted some excellent tax policy posts: 

Should People Who Make $250,000 a Year Worry About Obama’s Tax Proposals?

Kevin Drum and Dave Weigel take off after rich people who don’t understand that they only pay marginal tax rates on the extra dollars they earn above taxation thresholds.  “This isn’t true, of course. Obama is only proposing to raise tax rates on income over $250,000, so if your income goes up to $251,000, you only pay the higher rate on the extra $1,000. The tax bill on your first $250,000 stays exactly the same.”

Their analysis is basically sound, except for the fact that it is not quite true.  They have forgotten to look at deduction phaseouts, surtaxes, and the AMT, which are not taxes on marginal income.*

Followed up by:

More On That Wrinkly Tax Code, which addresses the disincentives to improving your income when you receive an earned income tax credit.

And then by Still More Tax Wrinkles on the way the tax law has surprising and painful definitions of “highly-compensated” employees.

I am thankful the IRS has decided to defer until 2014 the regulations for capitalizing expenditures for tangible property.  (Notice 2012-73) Now I don’t feel so bad for not having read them yet.

I am thankful I never thought it was a good idea to evade taxes by having money due to me paid to my spouse instead.  Criminal mastermind, that guy.

 

I am thankful for all of the other tax bloggers who give me much to link to and think about, link, and agree or disagree with:

Kay Bell,  Be thankful for — and claim! — the American Opportunity education tax credit while it’s still here

Anthony Nitti,   The Top Ten Tax Cases Of 2012, #6: No Good Deed Goes Unpunished – Failure To Follow Appraisal Rules Costs Taxpayer $19 Million Charitable Contribution Deduction

Jim Maule,   When the IRC Defines a Term, It Trumps Other Definitions

Jana Luttenegger,   Giving Back After Hurricane Sandy (Davis Brown Tax Law Blog)

Trish McIntire,  Bye Bye NOLs – Kansas

Patrick Temple-West,  Congress seeking ways to raise taxes but leave tax rate as is, and more

TaxGrrrl,   Will Online Sales Taxes Push Shoppers Towards Black Friday Or Cyber Monday?

Joseph Henchman,   South Carolina Tax Collector Leaves After Cyberattack Accesses Taxpayer Records.  He should be leaving on a rail with a tar-and-feathers ensemble.

Robert D. Flach,  1099-K PROBLEMS HAVE NOT GONE AWAY

Linda Beale, Globalization, winners and losers, inequality, and the right tax policy (Part I of “Just What Tax Reform?”)

Going Concern,  Alleged CPA Creep in Columbus Is Out on Bail, Still Really (Allegedly) Creepy

 

Most of all, I am thankful for great clients and readers that make the Tax Update possible and fun.  Thanks!

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Tax Roundup, 11/16/2012: Yes, failure is an option. And lawyers!

Friday, November 16th, 2012 by Joe Kristan

If disaster is on the menu, we have elected the right cooks.  From Tax Analysts ($link):

Failing to pass an alternative minimum tax patch during the lame-duck session of Congress would be a “real recipe for disaster” resulting in delayed processing of tax returns and economic harm, a former IRS official said November 14.

Clarissa Potter, a former IRS deputy chief counsel (technical) and former acting chief counsel who is now with American International Group Inc., said that because the IRS has programmed its computers under the assumption that the AMT patch and related tax credit ordering rules would be enacted before the filing season begins in January, failure to pass those provisions would force the IRS to reprogram its computers and delay the processing of tax returns until the end of March “at the earliest.”

With our political class, disaster is always an option!

 

What the fiscal cliff looks like from the back side of the electionMy new post at IowaBiz.com, the Des Moines Business Record blog for entrepreneurs.

Patrick Temple-West,   Obama’s “new ideas” likely well-worn tax proposals, and more  (Tax Break)

Joseph Thorndike, Is There a Tax Reform Consensus? (Tax.com)

Donald Marron,  Understanding President Obama’s Revenue Targets (TaxVox):

As rough justice, therefore, you can think of the president’s $1.6 trillion target as being almost entirely composed of his proposed tax increases on high-income households: $968 billion + $584 billion = $1.552 trillion. That ignores dozens of his other proposals, of course, but gives a good sense of what’s in his overall revenue aspiration.

Which shows it’s all just playacting, because the rich guy doesn’t have enough money to pick up the tab.

Nor does gloating.  Sore-Losing Doesn’t Bode Well for Well-Considered Policy Choices on Taxes… (Linda Beale).

 

Jason Dinesen,  That E-mail From the IRS Isn’t Really From the IRS :

The IRS never, ever sends e-mails to taxpayers. If you get an e-mail from the IRS … the IRS didn’t send it. It’s a phishing scam. 

Paul Neiffer,   Farm Lending Rose at Fastest Pace in Five Years

TaxGrrrl,   New Taxes Boost Cost of Nutella As French Take Measures to Avoid Getting Fat.  Not eating it works better than taxing it.

Joseph Henchman,   Colorado Debates Marijuana Tax; Would Be First Genuine Revenue-Raising Tax on Illegal Drug.  Until Congress repeals Internal Revenue Code Section 280E, which prohibits deductions connected with selling marijuana and other mostly illegal drugs, tax ruin awaits those who tries to sell legal pot in Colorado.

Presumably without the aid of marijuana, Robert D. Flach has a new Buzz!

 

Lawyers, Lawyers, Lawyers!   Starting with Jim Maule,  When Tax Meets the Demands of Law Practice.  Wherein a lawyer bungles his own tax case.

It was a rough day for lawyers yesterday down south.  From Cincinnati.com:

A federal judge has sentenced longtime Northern Kentucky lawyer Meredith “Larry” Lawrence to two years and three months in prison Thursday for failing to report income from various sources – including Racers Gentleman’s Club in Sparta.

No, he didn’t perform at the club; he owned it.  U.S. Attorney Elaine Leonard argued for a longer sentence:

“The evidence at trial also established that the defendant’s conduct went well beyond merely submitting false income tax returns,” Leonhard said. “Simply put, skimming cash was the defendant’s business model, a model he adopted in every business venture he pursued, whether it was his law practice, his strip club, or his role as a landlord.”

Leonhard described how fees collected from women who stripped at the club would be stuffed into a white envelope and delivered to Lawrence once a week. Strippers were independent contractors required to pay house fees to dance at the club. The strippers also had to pay a parking fee.

Some of the unreported income was money diverted from a special escrow account for lawyers, called an IOLTA account.

 

Meanwhile in Tennessee, Knoxews.com reports:

A former Knoxville lawyer has been convicted in federal court of income tax evasion.

John Threadgill, 69, faces sentencing March 14 before U.S. District Judge Thomas W. Phillips. He faces up to five years in prison and up to a $250,000 fine.

A jury returned the verdict Wednesday after a five-day trial.

He was charged with deducting personal expenses, including a $69,000 wedding.  I hope the couple appreciates it.

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Tax Roundup, 11/15/2012: Austerity: I don’t think that word means what you think that means. Also: Harleys!

Thursday, November 15th, 2012 by Joe Kristan

Scott Hodge, President’s $1.6 Trillion Tax Bid Lowers GDP, Wages, Living Standards (Tax Policy Blog):

According to this morning’s Washington Post, President Obama’s opening tax offer in his negotiations with Congress over the Fiscal Cliff is the $1.6 trillion in new taxes that were the centerpiece of his FY 2013 budget. Recently, Tax Foundation economists used our Tax and Macroeconomic Model to simulate the long-term economic impact of the President’s proposals – specifically, his proposals to increase taxes on high-income taxpayers [full report here].

In short, the model results indicate that the President’s plan would not only lower GDP and capital formation, but it would reduce after-tax incomes for every household – not just families hit by the higher taxes.  

No, we’ll just sink the rich guy’s end of the boat!

 

Linda Beale,   Calling all Americans: we face an “austerity crisis” not a fiscal “cliff”; we need a piecemeal solution, not a “grand bargain”.  Austerity?  Really?

Source: Heritage Foundation

If that’s austerity, I’d hate to see what free spending looks like.

 

We’ll never know, will weWould Mitt Romney Have Wanted to Raise Taxes Too? (Ed Krayewski, Reason.com)

Going Concern,   The Fiscal Cliff: As a CPA, People Expect You to Know this Crap

Anthony Nitti,  More On The Fiscal Cliff.

Patrick Temple-West,   Essential reading: Senate Finance chair sees flexibility on Bush tax cuts, and more (Tax Break)

Paul Neiffer,   No AMT Extender May Prevent Farmers From Filing on March 1

Daniel Shaviro,   Obama’s reply to the Republicans on closing income tax “loopholes”

Andrew Mitchel,   I.R.S. Rules that Mexican Fideicomiso is Not a Trust.

This ruling has broad implications for many taxpayers owning real estate in Mexico.  Taxpayers for years have had questions about whether Mexican fideicomisos are trusts.  Some if these taxpayers may have even entered into voluntary disclosure programs and paid significant penalties over the fear that they may be subject to various penalties.  However, if a Mexican fideicomiso is not a trust, then it is not a foreign trust, and no Form 3520 or Form 3520-A would be required to be filed.

Of course, private letter rulings are directed only to the taxpayer requesting it and they may not be used or cited as precedent. However, Rev. Rul. 92-105 is a ruling on which taxpayers can rely and can cite as precedent.  Because there can be huge penalties for failing to file Forms 3520 and 3520-A and because the terms of each fideicomiso will vary, taxpayers should be cautious in determining whether they need to file Forms 3520 and 3520-A for Mexican fideicomisos.   

Let’s hope the IRS provides more guidance so we can know what needs to be filed.

 

When “thank you” doesn’t cut it:

When a charity receives a gift, it needs to say more than a simple thank you.

The Internal Revenue Service requires that a donor produce a record from the charity to show a gift over $250 had no strings attached. A thank you note can be a good enough record, as long as it includes the magic words: “No goods or services were received in exchange for the contribution.”

Without the magic words, you get no deduction, even with a cancelled check.  Arden Dale explains in the Wall Street Journal (Via Tax Break)

 

Robert D. Flach,  LOCK IN 2012 MEDICAL DEDUCTIONS.  “… did you know that beginning with tax year 2013 the AGI exclusion increases to 10% for taxpayers under age 65?”

Kay Bell,   Zero capital gains tax rate set to disappear on Jan. 1, 2013

Russ Fox,  FTB Appeals Gillette Decision.  This is a big deal to any multistate business with California taxes.

TaxGrrrl,  Janeane Garofalo Finds Out She’s Been Married… For 20 Years.  Tax hilarity ensues.

 

IRS, vintage Harley Dealer. The IRS will be auctioning a bunch of antique motorcycles in Elkmont, Alabama on December 1, including this “1946 Flathead”:

 

Details here.

 

Isn’t it immoral to send money to the tax man that should be going to the shareholders?  United Kingdom M.P., Margaret Hodge, has an odd moral code.  She thinks that it is immoral to — I don’t know?  Not leave a tip after you compute your tax bill?   She thinks that Starbucks should give the State more of their cash. From Rachel Moran at Reason.com:

In the past three years Starbucks has paid no corporation tax in the UK. Amazon has paid £1.8m, despite bringing a total revenue of £200m in the UK in 2011. Starbucks global chief financial officer Troy Alstead insists the company remains “an extremely high tax payer globally” but, as UK profits have been far from substantial, claims, “respectfully, I can assure you there is no tax avoidance here.” Similarly, Matt Brittin, the head of Google’s northern European operation, defends the company’s practices. “Like any company you play by the rules [and] manage costs efficiently to offer fair value to share holders.”

Google‘s Brittin told the committee that “we comply with the law in the U.K.” and “it would be very hard for us to pay more tax here based on the way we are required to structure by the system.” ABC News reports that Hodge responded by saying that the committee was “not accusing you of being illegal, we are accusing you of being immoral.”

If we are going to start talking about morality, let’s start with the morality of forcing people to hand over their money to politicians so they can buy votes with it.  If I ever have an IRS exam where the agent offers no change to the return but says I’m a bad person, my client won’t be too upset.

 

Not just any Tom, Dick or Terry.  “In a story Nov. 14 about a wind energy tax credit, The Associated Press misidentified Iowa’s governor. He is Terry Branstad, not Tom Branstad.”  (Associated Press story).

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Tax Roundup, 11/13/2012: What awaits at the bottom of the cliff. And carrots!

Tuesday, November 13th, 2012 by Joe Kristan

At the bottom of the cliff.  Tax Policy Blog’s  Monday Map: Tax Increase from Fiscal Cliff for Median Four-Person Family in Each State.

New Jersey gets the worst of it, while Iowa, at only 42nd place, still faces a 4.41% tax increase as a percentage of family income.  Whee!

 

Paul Neiffer,   20%/33%/45%/59% – How Much Will Your Capital Gains Rate Go Up By?!

When you fall off the fiscal cliff, you will be a bump on the road at the bottom.  Is it a fiscal cliff or merely a bump in the road? (Linda Beale)

Kay Bell,  Republican resistance to tax increase compromise crumbling?  If Republicans go along with tax increases without much larger spending cuts, they might as well sell the furniture and embrace the one-party state.

William Perez,  TIGTA Reveals Cause of Refund Delays that Occurred in Early 2012.  Thank ID theft and “Modernized E-file.”

 

But we never do it that way.  LET’S DO SOMETHING RIGHT FOR A CHANGE (Robert D. Flach):

And, as I have said over and over again, the Earned Income Tax Credit, refundable and otherwise, and refundable Child Tax Credit, which, if you call a spade a shovel, are really forms of welfare, would be better distributed via the Aid to Families with Dependent Children program – and with substantially less fraud.

But why would we want to make it hard to scam the system?

Speak for yourself!  Please Raise Our Taxes (Kaye A. Thomas)

Penalized twice:  Penalty On Qualified Retirerment Plan Withdrawal To Pay Alimony  (Peter Reilly)

TaxGrrrl, Making Sense of Income and Tax Terms

Sales tax behavioral response:  To Avoid 21% Ticket Tax, Theater Sells $16 Carrots, Gives Away Free Tickets  (TaxProf) 

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Tax Roundup, 11/8/2012: Denison Day! And some things to look forward to.

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.

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Tax Roundup, 10/30/2012: Scary stories for Beggar’s Night. Also: Sandy tax tips.

Tuesday, October 30th, 2012 by Joe Kristan

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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)

 

 

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Tax Roundup, 10/26/2012: Central Iowa ESOP flunks out in Tax Court. And lots more!

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)

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Tax Roundup, 10/25/2012: Extra services at the post office. And there’s no such thing as a free sandwich.

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.

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Tax Roundup, 10/19/2012: How big can small be? Plus: gift tax annual limit goes to $14,000 in 2013.

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.

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