Posts Tagged ‘Margaret Van Houten’

Tax Roundup, 5/6/14. Welcome back, loyal client. IRS says I have to verify that you aren’t a shape-shifting alien.

Tuesday, May 6th, 2014 by Joe Kristan


e-file logo
It’s not enough that you’ve done business with me forever.  I need some ID.  
The invaluable Russ Fox yesterday threw light on new requirements for electronic filing from the IRS.  These requirements, found in their new Publication 1345, were issued with no public comment period or consultation with practitioners, as far as I can tell, and they sure look that way.

Let’s start with clients who come into our office – a minority of my clients, by the way, as most of my clients either mail in tax information or send it electronically.  Words are from Publication 1345, but emphasis is mine:

The ERO must inspect a valid government picture identification; compare picture to applicant; and record the name, social security number, address and date of birth. Verify that the name, social security number, address, date of birth and other personal information on record are consistent with the information provided through record checks with the applicable agency or institution or through credit bureaus or similar databases.

So I have clients I have been working with since 1985.  When retired gentleman comes in, a little slower than last year, with his cane, but still as charming as ever, I have to say “hold it right there, partner.  You may look like the client I’ve been working with for 28 years, but you might be a clever shape-shifting alien scum looking to defraud our government.  I need to see some picture ID.  Then excuse me while I call the credit bureau.”

This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

Oh, but it isn’t that bad:

For in-person transactions, the record checks with the applicable agency or institution or through credit bureaus or similar databases are optional.

Oh, I only have to run credit checks on my long-time clients who don’t come into the office.  Gee, that’s mighty kind of you, IRS.

Examples of government picture identification (ID) include a driver’s license, employer ID, school ID, state ID, military ID, national ID, voter ID, visa or passport.

“National ID?”  I guess that must be next in the IRS off-plan business plan.

You’re thinking, “calm down, Joe.  Surely you are overreacting.  The IRS doesn’t really want you to card your longtime clients, right?”  Well, wrong:

If there is a multi-year business relationship, you should identify and authenticate the taxpayer.

You may think they are longtime clients, but you don’t know if you’ve been fooled by imposters all along!

Of course, this is all a reaction to the identity theft epidemic that the IRS has allowed to spread virtually unchecked for years.  The IRS, an agency too clueless to notice that 655 refunds are going to the same apartment in Lithuania, is now responding to the riot it incited by firing at the bystandersqea0hm77.  It is creating an enormous new and uncompensated burden on preparers and their clients that will do nothing to eliminate ID theft.

Rashia didn't use these bundles of cash at a CPA office.

Rashia didn’t use these bundles of cash to pay preparers.

Why won’t this work?  Most ID thieves work like Rashia Wilson, the self-proclaimed “Queen of IRS Tax Fraud.”  She used store-bought software to claim millions in tax refunds belonging to other people whose identities she had stolen.  ID thieves don’t walk into legitimate tax shops and pay to have fraudulent refunds claimed.  

 

Oddly, none of this applies to paper filings.  If the IRS is really serious about these rules, they can expect preparers  to sabotage the e-file process in self-defense by charging for the non-trivial new time and hassle of e-filing.  While preparers are required to e-file unless otherwise directed, taxpayers are allowed to choose paper.  Nothing says we can’t inform them of that right.  If even 10% of taxpayers respond by choosing to revert to paper, it will badly strain IRS facilities.  If 20% revert to paper, it will be a debacle for the agency.  And they’ll richly deserve it.

 

Other Coverage:

Russ Fox follows up with A Better Idea on Identity Theft. “The IRS should check each tax return’s address to verify it matches the address on file for the taxpayer.”  What a radical thought.

Robert D. Flach notes the Russ Fox post in today’s Buzz and adds, “Thankfully I am not an ERO – and after reading this I never will be!”

 

Flickr image by Christian under Creative Commons license.

Flickr image by Christian under Creative Commons license.

Kay Bell, 5 tax tips for Cinco de Mayo

Tony Nitti, Tax Geek Tuesday: Determining A Shareholder’s Basis In S Corporation Stock and Debt

TaxGrrrl, She’s Just Not That Into You: 11 Reasons Your Tax Pro Wants To Call It Off .  ” You need to tell your tax professional the truth. No matter how ugly it is.”

Keith Fogg, When One Spouse Files Bankruptcy How Should the Court Split the Refund Resulting from a Joint Return between the Estate of the Debtor Spouse and the non-Debtor Spouse (Procedurally Taxing)

Jason Dinesen, Tax Refunds and “Not Owing Tax”, Part 2 . “So if you get a refund, it’s possible that you “didn’t owe taxes,” but only if your “total tax” before refundable credits equaled zero.”

Margaret Van Houten, Anti Money Laundering Initiatives and Lawyers: What We Need to Know (Davis Brown Tax Law Blog).  “Unfortunately, however, not all well-intended actions are effective.”

 

20140506-1TaxProf, The IRS Scandal, Day 362.  What the IRS was busy with while the ID-theft fraud epidemic was getting rolling.

Howard Gleckman, Special Tax Penalties on Donald Sterling are a Personal Foul (TaxVox).  Not every foul has to be a tax issue.

Mindy Herzfeld, International Tax Trending (Tax Analysts Blog)

I reject this false choice.  Investment, GDP Slow in First Quarter: Bad Weather or Bad Tax Policy? (Stephen J. Entin, Tax Policy Blog)

 

News from the Profession.  BREAKING: CPA Exam Candidate Passes AUD  (Going Concern)

 

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Tax Roundup, 3/27/14: NASCAR subsidy heads to Governor. And lots more!

Thursday, March 27th, 2014 by Joe Kristan

20120906-1Don’t worry, our subsidies are carefully crafted to only help Iowans, and only for a limited time.  Until it’s slightly inconvenient.

When they built the big new racetrack in Newton, they had a unique deal: the track got to keep the sales tax it collected.  The deal was crafted to require the track be partly owned by Iowans, and that it would expire at the end of 2015.

Then NASCAR bought the track.  NASCAR is controlled by a wealthy North Carolina family , with nary an Iowan.  No problem!  The Iowa House sent a bill to the Governor yesterday (SF 2341) repealing the Iowa ownership rule and extending the subsidy through 2025.

The stories in Radio Iowa and the Des Moines Register only quoted the giveaway’s supporters.  For example:

Representative Tom Sands, a Republican from Wapello, said it’s a “performance based” tax break because NASCAR won’t get the rebate unless there are on-site sales.

“One of the questions might be: ‘What kind of return do we, taxpayers, get in the state of Iowa?’ And I drive on Interstate 80 twice every week like many of you do coming to Des Moines and have seen the construction that has happened around that Speedway just since it’s been there,” Sands said, “and we’ve got probably lots more of that we can expect into the future.”

The answer to that is: what makes this private business more worthy to keep its sales taxes than anyone else?  It’s a special deal that every other Iowa business competing for leisure dollars doesn’t get.  It’s the government allocating capital, and if anybody thinks the state is good at that, I’d like my Mercedes, please.

While this corporate welfare passed, at least some legislators are starting to wonder about this sort of thing.  14 representatives joined 9 state senators in opposing the bill.  When the Iowa Film Tax Credit passed, there were only three lonely opponents.  The 14 representatives who stood up for the rest of us: Baudler (R, Adair), Fisher (R, Tama), Heddens (D, Story), Highfill (R, Polk), Hunter (D, Polk), Jorgensen (R, Woodbury), Klein (R, Washington), Olson (D, Polk), Pettengill (R, Benton), Rayhons (R, Hancock), Salmon (R, Black Hawk), Schultz (R, Crawford), Shaw (R, Pocahontas) and Wessel-Kroeschell (D, Story).  Maybe we have the makings of a bi-partisan anti-giveaway coalition.

 

20120702-2Jason Dinesen, Iowa Tax Treatment of an Installment Sale of Farmland By a Non-Resident.  “The capital gain is recognized in the year of the sale and is taxable in Iowa. But what about the yearly interest income the taxpayer receives on the contract going forward?”

TaxGrrrl, Taxes From A To Z (2014): N Is For Name Change   

Paul Neiffer, Painful Form 8879 Process is on its Way.  The IRS, which has forced us to go to e-filing, now plans to make it a time-consuming nightmare for practitioners and clients because of the IRS failure to prevent identity theft.

Tax Trials, U.S. Supreme Court Reverses Sixth Circuit on FICA Withholding for Severance Payments

Margaret Van Houten, Digital Assets Development: IRS Characterizes Bitcoin as Property, Not Currency

William Perez, Tax Reform Act of 2014, Part 2, Income

 

Illinois sealLiz MalmHow much business income would be impacted by Illinois House Speaker Madigan’s Millionaire Tax?

These data indicate that:

  • 54 percent of total partnership and S corporation taxable income in Illinois would be impacted by Speaker’s Madigan’s millionaire surcharge. That’s almost $10 billion of business income.

  • 6 percent of sole proprietorships AGI would be impacted. Important to note here is that not all sole proprietorships earn small amounts of income. Over three thousand would be hit by the millionaire tax, impacting $674 million of income.

  • Taken together, this indicates that 36 percent of pass-through business income is earned at firms with AGI with $1 million or more.

I don’t think this will end well for Illinois.  When you soak “the rich,” you soak employers.  When states do this, it’s easy to escape.

 

Christopher Bergin, Good Grief! Tax Analysts v. Internal Revenue Service (Tax Analysts Blogs)

I have been involved in two Tax Analysts FOIA lawsuits against the IRS. Neither one of them should have gone to federal judges. But the IRS’s secrecy, paranoia, and belief that it has the absolute right to hide information drives it in this area. This lawsuit was a waste of time and money – against an agency that argues that it doesn’t have enough of either — over documents that should have been public from the beginning.

I’m left to quote Charlie Brown: Good grief! What an agency.

Commissioner Koskinen’s pokey response to Congressional document requests needs to be considered in this context.  The IRS has not earned the benefit of the doubt.

Kay Bell, IRS chief Koskinen spars with House Oversight panel

 

Greg Mankiw, Not Class Warfare, Optimal Taxation:

Today’s column by Paul Krugman is classic Paul: It takes a policy favored by the right, attributes the most vile motives to those who advance the policy, and ignores all the reasonable arguments in favor of it.

In this case, the issue is the reduction in capital taxes during the George W. Bush administration. Paul says that the goal here was “defending the oligarchy’s interests.”

Note that when Barack Obama ran for President in 2008, he campaigned on only a small increase in the tax rate on dividends and capital gains. He did not suggest raising the rate on this income to the rate on ordinary income. Is this because Barack Obama also favors the oligarchy, or is it because his advisers also understood the case against high capital taxation?

Oligarchists everywhere.

 

20140327-1Leigh Osofsky, When Can Concentrating Enforcement Resources Increase Compliance? (Procedurally Taxing)

Cara Griffith, Taxing Streaming Video (Tax Analysts Blog)

TaxProf, The IRS Scandal, Day 322

Renu Zaretsky, Friendly or Penalty? Taxes on Married Couples, Businesses, and the Uninsured (TaxV0x).  Rounding up the tax headlines.

Jack Townsend, Scope and Limitations of this Blog: It Is a Tax Crimes Blog, not a Tax Crimes Policy Blog.  “I conceive my blog as a forum to discuss the law as it is, including how it develops.  It is not a tax policy blog addressing issues of what the law ought to be.”

 

Russ Fox, Bozo Tax Tip #9: 300 Million Witnesses Can’t be Right.  Richard Hatch is not widely considered a tax role model.

News from the Profession.  Frustrated EY Employee Vandalizes Office Breakroom in Protest Over March Madness Blocking (Going Concern)

 

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Tax Roundup, 12/19/2013: Government finally to stop promoting identity theft. And more year-end tips!

Thursday, December 19th, 2013 by Joe Kristan

DMFGovernment shuts down identity theft enabling operation: its own.  The budget compromise headed to the President’s death places new restrictions on the Social Security Death Master File.  While prized by genealogists for their work, it’s prized even more by thieves, who use the information on it to snap up fraudulent tax refunds in the names of the dead.  It’s been a multi-billion dollar problem for years.

The person who stole the identity of the late husband of Jason Dinesen’s client almost certainly did so using DMF information, stealing unknown amounts from the government and disrupting the client’s tax life for years.

Bloomberg Business explains the new restrictions:

The legislation would exempt the records from the federal Freedom of Information Act and give the Commerce Department 90 days to set up a process to certify legitimate users. The public would have access to the data three years after an individual’s death.

The language in the bill was taken from a Senate Finance Committee draft from which lawmakers had asked for comment by mid-January, said Alane Dent, vice president for taxes and retirement security at the American Council of Life Insurers.

While the restrictions seem long overdue, not everyone is happy about them, aside from identity thieves.  Newsweek reports:

“Closing the Death Master File is ludicrous,” said Melinde Lutz Byrne, one of the nation’s top genealogists and part of a small group of forensic researchers at Boston University. They have banded together and for two years have fought similar proposals in Texas and Florida to block public access to the Death Master File.

“It is my opinion that the science of it all has bypassed our elected representatives and even the courts,” she said.

It’s a trade-off, but I think preventing fraud deserves priority here.  Still, the objectors are right about this:

“The IRS is handing out money like candy – and nobody wants to acknowledge it,” said Sharon Sergeant, a forensic researcher, technologist and tax-software programmer who strongly supports the Boston University group. “Why isn’t it checking to make sure dead people aren’t getting tax returns? Somebody who reads the obituaries and makes up a social security number the right way, according to the algorithm, can file a tax return and get a payment. It’s got nothing to do with the Death Master File. It has everything to do with the IRS not doing its job.”

But The Worst Commissioner Ever felt it was more important to expand power over preparers than to stop the thieves.

 

2013 year-end tip: Donate your appreciated stock now!  The tax law allows you to claim a full-value charitable deduction for donating appreciated long-term capital gain securities that are publicly-traded.  It’s a tax-efficient way to donate, as you get the full deduction without ever paying tax on the appreciation.

But there is a hitch: you have to get the stock to your favorite charity’s brokerage account by December 31 to get the deduction.  That can take time, especially when dealing with less-sophisticated smaller charities.  If you want a 2013 deduction, start by contacting the charity and learning how they want you to get the securities to them by year-end. Remind the charity that they need to provide you a written acknowledgement of the gift.  And make sure your own broker knows the transfer has to be completed this year.

Come back tomorrow for another 2013 year-end tax tip!

 

20120906-1Just bluffing.  “Archer Daniels Midland Co. decided Wednesday to set up its new international headquarters in Chicago even after it failed in its bid for millions of dollars in state tax breaks.”  Next time our politicians claim to have “created jobs” by giving away your money, remember that they are giving their friends money to do things they would be doing anyway.

 

 

Cara Griffith, The Tax Reform Debate…for a Limited Few in Wisconsin (Tax Analysts Blog):

What was advertised as an “outstanding opportunity for the hardworking taxpayers” to engage in discussions about tax reform are also closed to the public…

Making tax proposals available to the public and opening up a dialogue with affected taxpayers can be eye-opening for people who will eventually have to develop and administer the proposal. If tax legislation is enacted, those who wrote the legislation, those who will enforce it, and those who will be affected by it should all understand what the legislation was designed to do. 

Politicians and their friends don’t like company.

 

Christopher Bergin, Transparency Is in Our DNA (Tax Analysts Blog):

Tax Analysts is involved in litigation in the commonwealth of Kentucky to get its Department of Revenue to begin releasing redacted copies of final letter rulings. The agency is resisting that, which is why we are in court.

Bureaucrats and their friends don’t like company either.

 

Chris Stephens, Pressure Mounts Against “Jock Tax” in Tennessee (Tax Policy Blog):

For example, a player at the NBA league minimum of $500,000 who is paid per game would make about $6,097 per game. If the player plays only one game in Tennessee he would pay a tax of $2,500 for that game, which is a tax rate of 41 percent. It is also worth noting that the player would also pay approximately 40 percent in federal income taxes, potentially leaving almost nothing in take home pay.

The states that want to pick the stars’ pockets forget that not everybody is paid like LeBron.  Unfortunately, the federal proposal to prevent state income taxation of employees only in-state for a few days doesn’t cover athletes or entertainers, treating the couch-surfing musician the same as Peyton Manning.

 

20111040logoTaxGrrrl, IRS Finally Announces Start Date To 2014 Tax Filing Season  Filing season starts January 31.

Paul Neiffer,  Tax Filing Begins January 31, 2014

Jason Dinesen, Six Things I’m Talking to My Small Business Clients About at Year-End (Part 1)   

Tony Nitti, With Tax Break Set To Expire, Partnerships Should Consider Converting To C Corporations Before Year End.  This is a 100% exemption on gains for C corporation stock received on original issue held for at least five years.

Kay Bell,  Homeownership tax breaks to take in December

Robert D. Flach, WHAT’S NEW FOR NEW YORK INCOME TAXES FOR 2013

Margaret Van Houten, How to Maintain Records for your Digital Assets  (Davis Brown Tax Law Blog)

 

Janet Novack, Minus Taxes And Hype, $636 Million Jackpot Shrinks To $206 Million — Or Less 

Jim Maule, Let’s Not Extend The Practice of Tax Extenders.  Agreed.

Stephen Olsen, The “IRS Investigations” Scam.  A client he helped through the OVDI “amnesty” program gets targeting by a scammer.  Troubling.

Jack Townsend, Judge Rakoff Speaks on the Dearth of Prosecutions from the Financial Crisis   He quotes the judge: “But if, by contrast, the Great Recession was in material part the product of intentional fraud, the failure to prosecute those responsible must be judged one of the more egregious failures of the criminal justice system in many years.”

It’s at least as much political fraud as financial fraud, but political fraud is never prosecuted.

 

Tax Justice Blog, Murray-Ryan Budget Deal Avoids Government Shut down but Does Not Close a Single Tax Loophole, Leaves Many Problems in Place

TaxProf, The IRS Scandal, Day 224

 

News from the Profession: Future CPA Seeking the Best CPA Review Course Someone Else’s Money Can Buy (Going Concern)

 

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Tax Roundup, 12/13/13: Government by Connections edition. And how not to butter up your tax evasion judge.

Friday, December 13th, 2013 by Joe Kristan

20121220-120120906-1A Des Moines Register report on the introduction of the new ownership of the Iowa Speedway in Newton tells us how things work in Iowa:

No one needed super sleuth Sherlock Holmes to figure out one of the first priorities of NASCAR as the new owners of Iowa Speedway introduced themselves Thursday during a press conference.

Three Iowa legislators were parked front and center in a reserved seating area. Multiple times during the news conference, officials thanked Sen. Bill Dotzler and Representatives Dan Kelley and Rob Taylor.

When the event sprinted toward its own finish line, only the trio with desks at the statehouse were publicly asked to jump on stage for a photo with new track president Jimmy Small.

So why do our humble public servants get to hang with big NASCAR celebrities?   Because the ownership group that bought the speedway doesn’t qualify for the special corporate welfare that the legislature enacted just for the speedway a few years ago, and they want it re-enacted:

The law, as it stands, requires Iowa-based ownership. So the spigot that delivers that sales tax benefit, which Dotzler estimates at about $4 million to date, is being shut off as NASCAR grabs the steering wheel.

Dotzler promised to reintroduce the measure when the legislative session roars to life on Jan. 13, adding that he would support extending it beyond the original end date of 2016.

Government by special favor.  And who benefits?  NASCAR is a private company owned by a very wealthy family — one that evidently knows how to play the connections game.    Meanwhile the guy running the pizza joint, the real estate office, the implement dealership, he gets a horribly complicated Iowa tax system with high rates to pay for lots of loopholes for other people.  He gets automatic penalties for every honest mistake made in attempting to comply with this byzantine system.  But hey, NASCAR!

The legislature is just too darn busy to find a way to enact a simple tax system with low rates and low compliance costs for everybody.  But they have plenty of time to go to a press conference to sell a special tax break for a single wealthy out-of-state family.  Priorities.

 

William Perez has been cranking out lots of good stuff lately, including today’s Donating an IRA as a Year-End Tax Strategy.

Margaret Van Houten,  Do your Digital Assets have Value? Are they Important? (Davis Brown Tax Law Blog).  Don’t leave the heirs without the password to your Bitcoin vault.

 

20130419-1Christopher Bergin, Walk the Talk: The IRS Needs a Chief Who Supports Transparency (Tax Analysts Bl0g).  And by that, he means for the IRS, not just for us.

Tax Justice Blog,  New CTJ Report: Congress Should Offset the Cost of the “Tax Extenders,” or Not Enact Them At All.  I like the second alternative best.

Janet Novack,  Congressional Work Undone: Lapse Of Tax Credits Will Hit Job Creators 

Roberton Williams, Where Are Tax Rates Headed? (TaxVox)

 

If you like your kludge, you can keep it.  Obamacare’s Never-Ending Fix-a-Thon (Megan McArdle)

 

TaxProf, The IRS Scandal, Day 218.  “IRS Targeting: Round Two; The First Time Around, Targeting Conservatives Was a Secret. Now, Not So Much

Jack Townsend, Judge Rakoff, the Wegelin judge, Is Interviewed on the U.S. Initiative Against Swiss Banks

Phil HodgenRenunciation trends in Auckland “I received an email yesterday from a contact in New Zealand. Renunciations in the Auckland Consulate are apparently way, way up compared to last year.”

Stephen Olsen, Preparer Knappe(s) on the job: Delinquency Penalties, Advisors, and Reasonable Cause (Part 2 — I Finally Get to my point on Thouron). (Procedurally Taxing)

Get your friday Buzz! from Robert D. Flach!

 

ShockerGAO: IRS Lacks Adequate Internal Controls (TaxProf).  Maybe the $5 billion in annual refund fraud tipped them off.

Woo-hoo!  Tax and other fun at deductible office holiday parties (Kay Bell)

News from the Profession.  Aren’t You GLAD For This McGLADrey Holiday Card? (Going Concern)


OtterThe Otter legal strategy.  A tax protester in Texas decided that his already slim chances in federal court would be helped by a really stupid and futile gesture.  It went as you might expect, reports Courthouse News Service:

It took a federal jury just one hour of deliberation to convict a Texas man of hiring a hit man to try to murder the federal judge presiding over his tax-evasion case.

Phillip Monroe Ballard, 72, of Fort Worth, was convicted Wednesday of attempted murder-for-hire, after a two-day trial. He faces up to 20 years in prison.

It’s not the first time a tax protester has tried to improve his case by going after the judge.  If it worked, though, that would have been a first.

 

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Tax Roundup, 12/9/2013: Denison! And 56 cents a mile for 2014.

Monday, December 9th, 2013 by Joe Kristan

The Tax Update is in sunny, but very cold, Denison, Iowa today.

20131209-1

I’m participating in the Iowa State University Center for Agricultural Law and Taxation Farm and Urban Tax School here.  The only remaining session is in Ames next Monday, so register now!

 

The IRS has issued updated standard mileage rates for 2014:

- 56 cents for business travel (down from 56.5 cents for 2013);

- 23.5 cents for medical travel;

- 14 cents for charitable travel.

Gas is down.  (Notice 2013-80)

Related: Paul Neiffer, IRS Almosts Eliminates the 1/2 cent

 

The EITC as a poverty trap: phaseouts of the benefit impose stiff marginal tax rates on the working poor.

The EITC as a poverty trap: phaseouts of the benefit impose stiff marginal tax rates on the working poor.

Mickey Kaus, Big Obamacare payoff for tax cheats?:

Doesn’t Obamacare create a big new incentive to fudge your income on your tax returns? The subsidies available on the health care exchanges seem to be based on adjusted gross income (line 37 on Form 1040)– and there’s a huge, conspicuous difference between the subsidy available at, say, a $25,000 income and a $46,000 income. (The subsidy cutoff of is $45,960 for a single person). In California, for the “bronze” policy I’m interested in, at $46,000 I’d pay $507 a month. At $25,000 I’d pay … $63. A difference of $444 a month.

I have mentioned quite often the high hidden marginal rates caused by the phase-out of the earned income tax credit.  The Obamacare subsidy phase-outs worsen this.  The government pays you to stay poor, or to cheat on your taxes if you aren’t poor anymore.  You get what you pay for. (via Instapundit)

William Perez,  Year End Review of Choice of Business Entity. “There is definitely no one-size-fits-all answer when it comes to deciding on an appropriate tax structure for a business.”

Margaret Van Houten, What our Estate Planning Clients Need To Know – What are Digital Assets? (Davis Brown Tax Law Blog).  On the importance of including “digital assets” in your estate planning.

Kay Bell,  Freezing? Home improvements provide warmth, tax savings

Jason Dinesen, Colorado Tax Guidance for Same-Sex Marriage 

Tony Nitti, IRS Addresses Deductibilty Of Organizational And Start-Up Costs Upon Partnership Technical Termination 

 

 

Lyman Stone, Missouri Gives In With $2 Billion Incentive to Boeing.  Missouri taxes its residents and existing businesses to give cash to an insider with good lobbyists.

How do you know that the new proposed 501(c)(4) regulations are designed to silence right-side speech?  The left-side advocacy groups have dropped their lawsuit demanding the IRS enact regulations to silence right-side speech (Huffington Post).

TaxProf, The IRS Scandal, Day 214 and Smith: The Latest IRS Power Grab

Robert D. Flach, HERE’S A THOUGHT – A FEW MORE CENTS ON A VOLUNTARY CREDENTIAL FOR TAX PROS.  “If the IRS does not decide to go ahead with a voluntary RTRP program after it loses the appeal of Loving v IRS, I have proposed an independent industry-based organization to administer a voluntary RTRP-like tax preparer credential in my ACCOUNTING TODAY editorial ‘It’s Time for Independent Certification for Tax Preparers. ”  It would be an improvement over the IRS system.

Peter Reilly, Cigarette Importer Sees $300M Deduction Go Up In Smoke   

 

 

Greg Mankiw, The Progressivity of the Current Tax Code :

20131209-2

 

Jack Townsend,  Swiss Banks Scrambling to Commit to Participation in U.S.Swiss Bank Initiative

TaxGrrrl, IRS To Rapper: It’s Hammertime!  Remember M.C. Hammer?  The IRS does, even if you don’t.

 

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

Friday, June 28th, 2013 by Joe Kristan

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

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

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

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

TaxProf, The IRS Scandal, Day 50

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

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

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

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

 

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

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

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

 

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

 

More DOMA demise fallout

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

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

Peter Reilly, DOMA Decision May Affect Civil Unions

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

 

In other news…

Trish McIntire, Amortizing Your Life:

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

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

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

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

Robert D. Flach is ready with your Friday Buzz!

 

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

 

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

 

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Tax Roundup, 1/31/2013: Happy IRA mulligan day! And on brief, the Tax Update!

Thursday, January 31st, 2013 by Joe Kristan

20111109-1Today is the last day to make a charitable IRA rollover for 2012.  Yes, 2012 is over, but taxpayers who are required to make IRA minimum annual distributions may still have one 2012 transaction left in them.

- Taxpayers who are born before July 1, 1942 who took cash from an IRA in December 2012 can contribute up to $100,000 to a charity today and have it excluded from their 2012 income.

- Taxpayers who have failed to take their required minimum 2012 distribution can avoid the 50% penalty for failing to take their distribution by arranging for the IRA to transfer the minimum amount, up to $100,000, to a charity today.

These opportunities are part of the retroactive extension of the rule allowing up to $100,000 to be transferred from an IRA directly to a charity without including the amount in the IRA owner’s income.  This avoids the 50% of AGI charitable contribution limit.  It also avoids other potentially unpleasant consequences of having the IRA income above-the-line, like making your Social Security taxable.

 

On brief, the Tax Update Blog.  The Institute for Justice, the victorious legal team behind the shutdown of the preparer regulation program, has filed a brief opposing a stay in the injunction against the program.  Making their case airtight, they cite the Tax Update, along with tax bloggers Kelly Phillips Erb (TaxGrrrl), Robert D. Flach  and Jason Dinesen.  From Footnote 18 of the brief:

For an example of the disruption routinely caused by the IRS’s misadministration of the RTRP regulations, see Alban Decl., Ex. 3 (the comments from preparers are illustrative and reference previous examples of similar disruptions); see also Joe Kristan, IRS quietly delays CPE requirement under new preparer regulation scheme , Tax Update Blog (January 8, 2013), http://rothcpa.com/2013/01/irs-quietly-delays-cpe-requirement-under-new-preparer-regulationscheme/ (describing IRS message as “a quiet admission of failure”).

With the Tax Update Blog on their side, who can be against them?

 

What does a poor college student have that could be lucrative to a thief? A Social Security number.  From the Memphis Business Journal:

With tax season bearing down, the IRS has a warning about a new refund scam aimed at college students, seniors and church members.

The Internal Revenue Service said Tuesday the scam tries to get students to give their personal identification and file tax returns claiming fraudulent refunds. It has sent misleading and bogus refund claims using the American Opportunity Education Tax Credit on college campuses throughout the Southeast.

Be very cautious about giving anybody but your employer, your bank, a medical provider or the IRS your Social Security number.  And never give it to a scammer.

 

David Brunori, Stifling Lefty — Political Correctness in the Tax Debates (Tax.com):

So the pro tax people managed to shut Mickelson up. Rather than engaging  in a discussion about why it is okay to take his money, they stifled him.

Shut up, they explained.

 

Paul Neiffer points out that now that penalties are waived for farmers who file after March 1, they may not want to file by their usual deadline:  File Your Return After March 1 Not Before!

 

Have you mailed your 1099s and W-2s?  Today is the deadline for sending them to recipients.  Russ Fox has the scoop.

TaxGrrrl, Ask the taxgirl: Tax ID Numbers and 1099s

Kay Bell,  Tax e-filing and Free File is now available for most taxpayers

Trish McIntire,  Freebies.  Don’t ask for them.

Chris Sanchirico,  Camp’s Investment Tax Plan: Implications for Lower Rates on Capital Gains? (TaxVox)

Tax Foundation, New Report: Cell Phone Taxes Exceed 20% in Several States

Margaret Van Houten and Jodie Clark McDougal,  Iowa Trust Industry Breathes a Sigh of Relief after the Supreme Court’s Reversal in Trimble

Cara Griffith, Kentucky DOR’s Disregard of Transparency (Tax.com)

Jack Townsend,  Another UBS Depositor Pleads

Patrick Temple-West,  India sees end to Vodafone tax dispute, and more

 

News you can use. IRS: No One Is Too Old, Too Poor Or Too Sympathetic To Avoid Prosecution  (Brian Mahany)

How to catch a dinosaur.  Not Income Tax Evasion – Structuring – That’s How They Got Kent Hovind (Peter Reilly)

Robert D. Flach goes into blog hibernation for the remainder of tax season:  SO LONG, FAREWELL, AUF WIEDERSEHEN, GOOD NIGHT!

These are a few of my favorite things…  Guns and Tax Returns. (Christopher Bergin, Tax.com).

 

Today’s morale builder: Les Misérables-Inspired Video Reminds You That Busy Season Kills Your Dreams (Going Concern)

 

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Tax Roundup, 1/3/2013: Now Iowa’s filing season is a mess.

Thursday, January 3rd, 2013 by Joe Kristan
The Hoover Office Building, the warm and cuddly home of the Iowa Department of Revenue.

The Hoover Office Building, the warm and cuddly home of the Iowa Department of Revenue.

The Fiscal Cliff Bill complicates Iowa tax returns for 2012.  Iowa doesn’t automatically adopt federal tax law changes, so some retroactive tax law provisions in the Fiscal Cliff bill won’t apply to Iowa state income taxes absent action by the Iowa General Assembly.  From an Iowa Department of Revenue e-mail to practitioners yesterday:

The federal legislation passed on January 1, 2013 to avert the “fiscal cliff” included provisions for what are commonly referred to as the federal “extenders.” The federal “extenders” are not currently reflected on Iowa tax forms for 2012 and will require approval by the Iowa legislature before being allowed for Iowa tax purposes. Should legislative approval be given, Iowa online forms will be updated accordingly. The federal extender provisions include:

  • Educator Expenses (Line 24; IA 1040)
  • Tuition and Fees (Line 24; IA 1040)
  • Itemized Deduction for State Sales /Use Tax Paid (Line 4; IA Schedule A)
  • Treatment of mortgage insurance premiums as qualified residence interest (line 11, schedule A)
  • The federal section 179 expensing limit of $500,000 for 2012 and 2013 

Iowa income tax returns must be filed based upon current Iowa law. Therefore, the extenders should not be included on Iowa returns at this time.

Let’s hope the legislature acts quickly to pass conformity legislation, or we will have another messy Iowa tax season.

 

Why 12%?  Today’s Des Moines Register story on reactions by Iowa business people to the Fiscal Cliff bill quotes me as saying that Iowa businesses may face a 12% reduction in their after-tax income.  Where did I get that number?

I started by computing the after-tax amount of a dollar earned by a top-bracket taxpayer under 2012 law, assuming full detectability of Iowa taxes on the federal return and vice-versa.  That results in a combined rate of 38.92%, leaving 60.18 cents in the taxpayer’s pocket.  Under the same assumptions using the 2013 39.6% top rate and the 3.8% surtax on “passive” income, the combined federal-state effective rate goes up to 46.39%, leaving 53.61 cents after-tax.  That’s a 7.48 cent reduction in after-tax income — 12.24% of the 60.18 cent 2012 after-tax number.

The 12.24% number is actually too low because it doesn’t account for the phase-out of itemized deductions for high-income taxpayers in the new bill.  For top-bracket taxpayers, itemized deductions will be reduced 3 cents for each additional dollar of income.  The result is a hidden 1.188% additional tax.  Plugging that into our tax computation gives a combined federal and Iowa rate of 47.46%, leaving 52.54 cents after-tax.  That reduces after tax income from 2012 law by 8.54 cents, or 13.99%.

Should I assume the 3.8% passive income tax, like I do in the above examples?  It won’t apply to K-1 income if all owners “materially participate” in a pass-through business.  Those taxpayers face “only” an 8.41% reduction in their after-tax income.  If you don’t think that’s significant, consider whet your reaction would be if your employer said that your after-tax pay was going down that much.

But the 3.8% tax will apply to family members that don’t participate in the business, like out-of-town siblings, retired founders, or children of owners.  The business has to distribute at least enough to let owners pay their taxes, which means the taxpayer in the highest bracket has to be covered.  For that reason many family-owned businesses will have to distribute enough to cover the 3.8% Obamacare net investment income tax, making the combined 47.46% rate their real rate.

 

Fiscal Cliff Notes

TaxProf,  House Approves Fiscal Cliff Tax Deal

Megan McArdle, After the Fiscal Cliff: What do Democrats Want?  “I submit that just as Republicans are more interested in entitlement cuts as talking points than as actual new laws, Democrats will prove much more interested in tax hikes in theory than in practice.”

Robert D. Flach, THE AMERICAN TAXPAYER RELIEF ACT OF 2012

William McBride, Fiscal Cliff Resolved, Still Likely to Get Downgraded

TaxGrrrl, The World Will Keep Turning, Even With The Expiration Of The Payroll Tax Cuts

Patrick Temple-West, Cliff bill means some pay more taxes, and more

Trish McIntire, American Taxpayer Relief Act of 2012

Paul Neiffer, Help! What Is My Capital Gains Tax Rate?!

Kay Bell,  What’s your 2013 tax rate and other fiscal cliff tax bill questions

Margaret Van Houten,  Estate and Gift Law Tax Aspects of Fiscal Cliff Legislation (Davis Brown Tax Law Blog)

Courtney A. Strutt Todd,  A Permanent Fix to the AMT Problem (Davis Brown Tax Law Blog)

Jana Luttenegger, Individual Tax Rates, Deductions, and Credits (Davis Brown Tax Law Blog)

 

Greg Mankiw has a pithy post that I hope he doesn’t mind me reproducing in full:

Here are the effective federal tax rates (total taxes as a percentage of
income) for 2013 under the new tax law, as estimated by the Tax Policy Center, for various income groups:

Bottom fifth: 1.9
Second fifth: 9.5
Middle fifth: 15.6
Fourth fifth: 19.0
Top fifth: 28.1

80-90 percentile: 21.5
90-95 percentile: 23.4
95-99 percentile: 26.3
Top 1 percent: 36.9
Top 0.1 percent: 39.6

 

Russ Fox,  Your Mileage Log: Start It Now!  Great advice.  If you travel on business and the IRS comes by, you’ll be glad you have that log.

David Brunori,   Only Tax Professionals Benefit from the State Corporate Tax.  (Tax Analysts Blog) Well, the loophole lobbyists do pretty well by it too.

Peter Reilly, Form 8332 – Don’t Let The Kids Live In Another Home Without One ?

TaxTV, IRS Penalty Relief-First Time Penalty Abate Program

Robert Goulder, The Unspoken Tax Expenditure (Tax Analysts Blog)

Jack Townsend, New Article on the Emerging Consensus for Taxing Offshore Accounts

William Perez,  Social Security Tax For 2013

 

Career planning news you can use:  Life After Public Accounting: Harassing Auditors For a Living Isn’t a Bad Gig If You Can Get It  (Going Concern)

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Tax Roundup, 10/10/2012: Happy Spiro Day! Also: Iowa’s business tax climate still frosty.

Wednesday, October 10th, 2012 by Joe Kristan

The Tax Foundation released its 2013 State Business Tax Climate Index.  Iowa dropped one place, to 42nd, switching places with Maryland in the bottom 10.  Iowa’s poor score has much to do with its terrible 49th-place ranking for corporation income tax.

Iowa scores badly on its corporation tax on a number of fronts:

- We have the highest stated corporation tax rate, and the second-highest effective rate taking the deduction allowed for half of the federal corporation income tax.

- Iowa has its own state corporation alternative minimum tax.

- Iowa no longer allows a corporation net operating loss carryback, distorting the tax on cyclical businesses.

- Iowa’s tax code is distorted by “incentive” tax credits that tend to favor pet industries and the well-lobbied.

Here’s what the full Tax Foundation report says about incentive tax credits (my links and emphasis):

Many states provide tax credits which lower the effective tax rates for certain industries and/or investments, often for large firms from out of state that are considering a move. Policymakers create these deals under the banner of job creation and economic development, but the truth is that if a state needs to offer such packages, it is most likely covering for a bad business tax climate. Economic development and job creation tax credits complicate the tax system, narrow the tax base, drive up tax rates for companies that do not qualify, distort the free market, and often fail to achieve economic growth.

Recently Iowa City policy analyst Peter Fisher wrote an op-ed piece saying that Iowa’s corporation buisness climate is just great, largely on the basis that it doesn’t collect much tax.  A big part of the reason it doesn’t collect much is the special breaks granted to favored businesses by smokestack-chasing politicians.  The Tax Foundation notes that these “economic development incentives” don’t work, citing the work of none other than Peter Fisher. 

The Tax Update’s Quick and Dirty Iowa Tax Reform Plan has a better approach to state business tax policy.  Key points:

- Abolish the state corporation income tax.

- Abolish all economic development tax credits and special deductions.  You name the special break, I’m against it.

- Lower the personal income tax rate to 4% or less with the money saved by eliminating complicated deductions, tax credits and subsidies.

Iowa’s political leaders –  both parties — trip over themselves throwing tax credits and special breaks around.   But does anybody think that “no corporate tax” wouldn’t be a better way to attract and grow industry than “we have dozens of special tax breaks if you know the right people”?

Related:

Tax Roundup, 9/27/2012: Misdirected charity edition.  Also: No, Iowa, you don’t have a good tax climate.

TaxProf,  2013 Business Tax Climate: Chilliest in Blue States

Russ Fox,  Why I’m Happy to be in Nevada and Not in California

Roberton Williams,  Marginal Tax Rates Matter More than Average Tax Rates (TaxVox).  This is relevant to Peter Fisher’s argument that Iowa’s highest-in-the-nation corporation taxa rate doesn’t matter because Iowa’s loopholes let so much revenue slip through.  It’s the rate on the next dollar of income that affects decisions.

 

Thirty-nine years ago today, Spiro Agnew resigned the vice-presidency to pursue other interests, but mostly to plead guilty to tax evasion.   The Washington Examiner reports:

He was accused of receiving kickbacks from contractors while he was governor of Maryland. He claimed the charges were “damned lies” and eventually pleaded in federal court in Baltimore to no contest to not paying taxes on $29,500.

As part of his plea deal, Agnew agreed to resign from office. He was sentenced to three years’ probation and fined $10,000. He was disbarred.

Coincidentally (I think), the debate between the two major party Vice-Presidential nominees is tonight.

In other crime news:

Judge rejects Wasendorf’s bid for jail release (KTTC.com).  The confessed embezzler couldn’t convince the judge that a prison term that will keep him behind bars past his 100th birthday might be a reason he might flee.

It’s not just Harleys:  Sturgis surgeon convicted of income tax fraud, faces prison, reports the Mitchell Republic:

A federal jury has convicted a Rapid City surgeon on 13 felony charges related to income tax evasion. 

Edward Picardi, of Sturgis, was accused of sending millions of dollars of income out of the country and filtering the money through offshore accounts to avoid paying taxes on it. His trial lasted three weeks.

Sturgis would seem like a funny place to look for the Tax Fairy.

 

 

Regarding yesterday’s news about the West Des Moines payroll firm that apparently has not been remitting client payroll taxes timely:   Victims in Alleged $3.8 Million Payroll Fraud by West Des Moines Company Coming Forward.  West Des Moines Patch reports that the payroll firm founder:

…is the subject of a first-degree theft and fraud investigation, according to a report on file at the West Des Moines Police Department.

In that report, Des Moines contractor Priority Excavating claimed losses of $850,000 the company paid InFocus Partners’ subsidiary, ILC Staffing Inc., to administer its payroll.

Owner Tobias “Toby” Torstenson told police Detective Tom Boyd that he was contacted by the IRS and informed his company has not paid federal taxes since 2009.

Torstenson paid the money to InFocus, who was supposed to forward it to the IRS but never did, the police report said.

The IRS will still want the taxes from clients that have forwarded them to the payroll provider.  If you outsource your payroll compliance, sign up for EFTPS so you can verify  online that your payroll provider is remitting your payments.

 

Kay Bell,  Mortgage interest, charitable donation deductions are safe, says Romney

Dan Meyer,  Presidential Debates and Changing Accountants

TaxGrrrl,  9 Tax-Related Myths About Selling Your Home

Jack Townsend,  Render Unto Caesar — Another Intersection of Alleged Religion and Tax

Margaret Van Houten, ACTEC Wealth Advisor: A New App For Your iPad (Davis Brown Tax Law Blog)

Jason Dinesen,  Would a Name Change Help Enrolled Agents? Part 2

Robert D. Flach comes through with his Wednesday Buzz.

The Critical Question:  Will Farmers Have More “Repairs” This Year? (Paul Neiffer)

News you can use:  The IRS Is Not Obligated to Pursue Your Whistleblower Claim  (Anthony Nitti)

 

 

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Tax Roundup, 6/27/2012: IRS secret shoppers and illegal hillbilly handfishing!

Wednesday, June 27th, 2012 by Joe Kristan

Another reason to file honest tax returns:Trying To Sell Bar To Undercover IRS Agents Gets Owner Free Federal Housing,” reports Peter Reilly.  A Chicagoan got ready to sell his bar, but he had to explain a little discrepancy between how profitable he told potential buyers that the business was, and what he told the IRS:  

 A couple showed significant interest in the place and met with him three times.  Mr. Psihos’s tax saving plan was elegant in its simplicity.  He simply did not report his entire gross income.  Besides not being a legitimate strategy, the plan has another flaw.  If you decide to sell the business, it will not appear to be worth nearly as much as it really is.  Mr. Psihos addressed that contingency by keeping extremely detailed records of his actual cash receipts.  He told the couple that he had the records that showed what he was “actually getting”.

Unfortunately for Mr. Psihos, the “couple” were really IRS agents.  As you might imagine, things went downhill quickly for Mr. Psihos, and now the Seventh Circuit Court of Appeals has upheld his two-year prison sentence.  Related: I lie to the IRS, but of course I’m telling you the truth!

75 years of pushing that rock uphill.  The Tax Foundation is celebrating its 75th anniversary of pushing for simple tax systems with low rates and without special interest breaks.  Much has been accomplished, but much work remains:

The tax structure of the 1950s was complex and over-burdensome, with a top marginal rate of 91 percent. 

Thankfully we have managed to move away from such a high marginal rate, yet many of the other issues mentioned persist, and in many ways our contemporary tax code is even more inefficient and stifling than it was in the late 1950s. Our concern over the growing “distorting effects” of taxation was well-founded; today, federal, state and local governments implement a host of taxes that exist primarily to alter individual and family behavior, often to the detriment of taxpayers.

Use the tax law to collect revenue, and forget using it to accomplish your wildest dreams.  Measuring income is hard enough to do by itself.

Look, Mom, no hands!  Iowa DNR cracks down on hillbilly handfishers.

 Anthony Nitti: If You Want To Argue A Home is Your Primary Residence, Perhaps You Shouldn’t Claim a Home Office Deduction on A Different Residence

Margaret Van Houten: Farmer’s Markets May Not Be Tax Exempt Organizations.  Banding together to sell things isn’t considered a charitable activity.  (Davis Law Firm Tax Blog)

Ways & Means members demand data on failed, costly debit card tax refund test  (Kay Bell)

It’s Wednesday, so it’s a Buzz Day for Robert D. Flach!

Kaye A. Thomas: Estate Exclusion Portability Regs Confirm Critical Deadline 

That casino buffet isn’t really free, high rollers: Nevada Tax Commission Votes to Approve Regulations to Tax Complementary Meals (TaxTV.com)

Tax policy nerds having too much fun: Bowles-Simpson Budget Reform and Ecstatic Memory (Howard Gleckman, TaxVox)

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Want to found a dynasty?

Tuesday, March 13th, 2012 by Joe Kristan

Margaret Van Houten explains proposals to allow eternal trusts now before the Iowa legislature at the Davis Tax Law Blog.

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