Posts Tagged ‘maule’

Tax Roundup, 5/31/2013: Obama and Shulman, buddies. And the hidden path to world domination.

Friday, May 31st, 2013 by Joe Kristan

Megan McArdle, Boy, the Head of the IRS Went to the White House A Lot

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I believe Megan is correct when she says that it is unlikely that Shulman was spending his time there conspiring against the President’s opponents:

Why on earth would it have taken 118 meetings?  Did Doug Shulman not  understand “target the tea party” the first 117 times Obama said it?  

The close contact between the IRS and the White House is actually what you might expect to see now that the IRS has become a ridiculous superagency with a portfolio dwarfing that of the traditional cabinet agencies.  Still, it’s very weird that Doug Shulman spent more time at the White House than the Treasury Secretaries and the Secretaries of Defense — combined.

Update: It would be less weird if it didn’t happen.

 

TaxProf, The IRS Scandal, Day 22

IRS, Bureaucratic Blunder or Political Profiling? (Topaccountingdegrees.org)

 

Kay Bell, More tax professionals (including bloggers) formally support legal challenge of IRS’ effort to regulate tax preparers.  That would be me.

Kyle Pomerleau, A Redistributional Effect of Obamacare (Tax Policy Blog)  Picking the pockets of healthy young men.

Estimated effect of Obamacare on health insurance costs in select states (via Tax Policy Blog)

Estimated effect of Obamacare on health insurance costs in select states (via Tax Policy Blog)

 

William Perez,  “Complaint Case #460575036224″ — Fake Email from the IRS.  Rule of thumb: if you get an e-mail that says it’s from the IRS, it’s not from the IRS.

Trish McIntire, Phishing Again

 

Paul Neiffer, Pay Your Kids!  If you can get them to actually do some work, of course.

Brian Mahany,  The Promised Land – FATCA Causes Record Number Of Americans To Leave.  Congress is making America more of a “selective” taste.

 

TaxGrrrl, Donations Pour In For Oklahoma Relief Efforts, Including $1 Million From Carrie Underwood and Kevin Durant

Patrick Temple-West,  Evidence that tax breaks favor the rich, and more.  Common sense, folks: the rich pay most of the taxes, so any “break” will go to the person who pays most of the taxes.

Howard Gleckman,  Who Benefits from Tax Preferences? You Do. (TaxVox): “When it comes to tax preferences, Pogo was right. “We have me the enemy and he is us.”

 

Fiduciary Income Tax Blog: Decanting.  Trusts, not old wine.

Jim Maule, The Tax Woes of a Corporation Owned by an Indian Tribe

Tax Justice Blog, Governor Cuomo Hearts Tax Cuts.  But only in some places.

Brian Strahle,  MIDDLE MARKET COMPANIES:  RECENT STATE AND LOCAL TAX “PAIN” POINTS

 

Christopher Bergin, Ireland Is Not a Tax Haven, Dammit (Tax Analysts Blog)

Robert D. Flach has his Friday Buzz on! I like this: “The recent scandal has proven that the IRS can’t even properly regulate its own employees, let alone try to properly regulate tax preparers!”

 

It’s a small world after all.  McGladrey’s Plan For World Domination: Nebraska! (Going Concern)

 

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

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

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

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

From WashingtonExaminer.com:

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

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

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

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

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

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

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

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

 

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

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

The question answers itself.

 

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

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

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

 

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

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

TaxProf,  The IRS Scandal, Day 20

 

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

 

Paul Neiffer, More States to Raise Taxes?

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

 

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

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

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

 

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

Jim Maule, Reader Weighs In on Weighing the Code

 

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

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

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

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

 

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Tax Roundup, 5/28/2013: Delayed Monday edition. And spam!

Tuesday, May 28th, 2013 by Joe Kristan

20130419-1Arnold Kling,  The IRS Scandal:

To me, the real story is the low status of the Tea Party.  As others have pointed out, if the NAACP or the Sierra Club had complained about harassment, politicians and the press would have investigated the story from day one.  But I think that it is wrong to think of this as an ideological double standard.  If Code Pink or Greenpeace had complained about IRS harassment, nobody would have risen to their defense. My point is that, in the eyes of the establishment, the Tea Party is closer to Code Pink or Greenpeace than to a respectable organization.

While I think Arnold is generally right, I think that Code Pink and Greenpeace would get a lot more establishment love than the Tea Party folks.  Constitutionalism and fiscal sanity just aren’t clubbable.

 

Doug Bandow, Restrain the Abusive Administative State (American Spectator, via Cafe Hayek):  “Reforming the IRS won’t make sense otherwise.”

Jack Townsend, Invoking the Fifth – the House Oversight Inquisition

TaxProf,  The IRS Scandal, Day 18

 

 Quotable:

Corporations make location decisions based on three main factors: labor costs, access to markets, and a qualified workforce. Without those factors, no amount of tax incentives will ever persuade a business to invest in a particular place. Scholarly research and a ton of anecdotal evidence show that businesses don’t make location decisions based on tax incentives. – David Brunori, Tax Analysts ($link)

Iowa just increased its tax incentive budget by $50 million.

 

Tony Nitti, Eleventh Circuit: Father Of The Year Candidate Recognized $36 Million In Taxable Income Upon Exercise of Options:

When the dust settled, Dad was left with a $14,000,000 bill, while his kids were entitled to a nice fat tax deduction. This act of poetic justice should remind all parents that if you’re going to be overbearing and meddle in your kids’ lives, try and confine your fatherly misgivings to hurling empty whiskey bottles at Little League umpires, like my old man.

 

Patrick Temple-West, Tax moves pit large companies against small, and more (Tax Break)

Peter Reilly, Current Tax Reform Push Less Promising Than 1986

 

Rich States, Poor States, an annual analysis of “state competitiveness” by the American Legislative Exchange Council (‘ALEC,”or, to Ed Fallon, “Satan”) is out for 2013.  The free-market group ranks Iowa at 25th overall for both “economic performance” and “economic outlook.”  Iowa rates well for its right-to-work rules, state debt, and court system, but poorly for its tax system.

Tax Justice Blog, Congratulations to Minnesota for Crossing the Finish Line.  No, in spite of their politicians best efforts, Minnesota isn’t finished off yet, but they’re working on it.  Minnesota rates 46th on the ALEC “economic outlook” list.

 

William Perez,  Tax Relief For Oklahoma Tornado Victims

Trish McIntire, New Form I-9

 

Kay Bell,  Memorial Day 2013: Remembering those who gave all, offering some tax help for those still giving

Jim Maule, Paying Taxes: In Memoriam.

 

Robert D. Flach starts off your short work week with a fresh Buzz!

Better Spam.  The spambots made 190 deposits into my spam inbox over the weekend.  Usually they have stupid names lie “Swaceague,” “Moncler Jackets” or “Cheap Moncler Jackets,” so I was pleasantly surprised to see “tom waits glitter and doom live” make an entrance.  Unfortunately the comment was typically spammy:

My spouse and I stumbled over here from a different web address and thought I might as well check things out. I like what I see so i am just following you. Look forward to looking at your web page again.

Dang.  It would be nice if Tom Waits really was spamming me.  But I am oddly intrigued that family web-surfing is a theme in spam.  “My cousin recommended this web page to me,” etc.  “My wife and I were surfing, and awesome commentary here.”  Are there really cultures where anybody would say something like that?  Is there somewhere on the planet a society where they delight in recommending favorite web sites to shirttail relatives eager to follow up on web recommendations from in-laws?

 

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Tax Roundup, 5/22/2013: Don’t blame me, I’m only the boss. Also: tornado tax relief.

Wednesday, May 22nd, 2013 by Joe Kristan
Former IRS Commissioner Shulman, showing how bad he feels about politcal harassment under his watch.

Former IRS Commissioner Shulman, showing how bad he feels about politcal harassment under his watch.

The Worst Commissioner Ever returned to Washington yesterday to testify before a Senate committee on the IRS scandal.  He bravely took responsibility for the targeting of disfavored political groups and apologized to the victims.

Well, not exactly:

 I certainly am not personally responsible for creating a list that had inappropriate criteria on it. And what I know, with the full facts that are out, is from the inspector general’s report, which doesn’t say that I’m responsible for that. With that said, this happened on my watch. And I very much regret that it happened on my watch.

In other words, I was just the boss, and you can’t blame me for what those crazy kids in Cincinnati do.

 

Just exercising the right they encouraged the Tea Partiers to use – silence.  The IRS functionary who announced the scandal in response to a planted question isn’t going to answer real ones.  From the Wall Street Journal:

Lois Lerner, the head of the Internal Revenue Service office that targeted conservative groups, intends to invoke her constitutional right against self-incrimination and decline to answer questions about the matter when questioned by a congressional committee Wednesday.

Ms. Lerner, director of the tax-exempt-organizations division at the IRS, notified the House Committee on Oversight and Government Reform through her attorney that she wouldn’t answer questions on the matter, according to a committee spokesman.

When it comes to the Bill of Rights, better late than never.

 

Is Washington a suburb of Cincinnati?  Oversight from Washington, All Along    (Eliana Johnson)

TaxProf, The IRS Scandal, Day 13

Watchdog.org, Top 10 quotes about Obama’s #scandalpalooza

Via Don Boudreaux, The Real Lesson of the IRS Scandal (Richard Epstein) and The Autocrat Accountants    (Mark Steyn)

Patrick Temple-West,  White House knew of IRS scandal in April, and more (Tax Break)

Clint Stretch, Targeting tax-exempts and tax reform (Tax Analysts Blog)

Joseph Thorndike, A World Without 501(c)(4)s (Tax Analysts Blog)

Russ Fox, Ms. Lerner Knows the Fifth (IRS Scandal Update)

 

In other news:

Kay Bell, Tornado-ravaged areas of Oklahoma declared major disasters, leading to special tax relief from IRS

Trish McIntire,  Oklahoma DIsaster- Tax Relief.

TaxGrrrl, IRS Announces Tax Relief For Oklahoma Tornado Victims

 

Paul Neiffer, Will Excess Farm Loss Rules Apply With New Farm Bill?

Jason Dinesen, How to Allocate the Deduction for Federal Estimated Tax Payments on Your Iowa Tax Return

Robert D. Flach, TRUE TAX TIME TALES – IRA WITHDRAWALS

 

Brian Strahle,  MARYLAND:  WYNNE CASE UPDATE

On Friday, May 17, 2013, the Maryland Court of Appeals denied the comptroller’s motion for reconsideration in Comptroller v. Wynne,  which struck down the state’s application of credits against pass through income from S corporations; however, the court stayed implementation of the ruling to allow the comptroller to petition the U.S. Supreme Court for certiorari.

Peter Reilly,  RVania Resident Taxed By New Mexico.  State tax problems of folks who live on the road.

 

Kaye Thomas,  Self-Directed IRA Implodes.  The same case I discussed here.

 

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

Jim Maule, Taxation is Not Theft.  It’s not theft when the government does it.

 

 

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

Monday, May 13th, 2013 by Joe Kristan

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

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

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

Another Washington Post story has this:

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

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

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

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

Megan McArdle,  Why Did the IRS Target Conservative Groups?

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

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

 

And some other coverage:

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

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

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

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

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

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

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

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

Ann Althouse has more.

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

 

In other news:

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

 

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

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

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

 

Trish McIntire,  Max and Dave Looking for Reform

Nick Kasprak,  Do Tax Cuts Pay for Themselves?

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

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

 

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

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

 

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

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

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

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

 

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

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

 

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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, 5/8/2013: Still no tax fairy. And no fiscal heroes.

Wednesday, May 8th, 2013 by Joe Kristan

tax fairySearch for the Tax Fairy leads to federal prison.  The Tax Fairy, in the imagination of believers, appears in the form of magical legal maneuvers that make your taxes all go away.   Your drinking buddies may even claim to have seen it, or that their tax guy knows her.

It can hurt when you find that there is no Tax Fairy.  It must hurt for one South Dakota surgeon.  From RapidCityJournal.com:

Friends and family described Dr. Edward Picardi as a compassionate, highly skilled surgeon, but the accolades failed to spare the doctor a five-year prison sentence for income tax evasion on Tuesday.

Despite the good the Sturgis man was proclaimed to have done in his life, Picardi, 56, is the same man a federal jury convicted of 13 felonies last October, U.S. Chief District Judge Jeffrey Viken said when he sentenced the doctor.

Picardi was charged with income tax evasion after an exhaustive federal investigation of his financial practices spanning 10 years from 1999 through 2009. He used an elaborate network of dummy corporations and several foreign banks to divert thousands of dollars in income.

The indictment says the scheme was hatched with the aid of a Maryland attorney who set up a phony employee leasing scheme to suck taxable income to shell companies, which the surgeon tapped for cash as needed.   This worked fine, until one day it didn’t, and now it’s a five-year unpaid vacation, plus tax, interest and penalties.

There is no Tax Fairy.

 

Jana Luttenegger,  Disclaiming an Inheritance  (Davis Brown Tax Law Blog).  Sometimes it’s better estate planning to turn down an inheritance and let it go to your kids or some other beneficiary.  But you have to do it right:

 Most importantly, the disclaimer must be made before you accept any benefit in the gift, and it must be an unqualified disclaimer. (No, you can’t have a party at the house and then decide you don’t want it.) Once the disclaimer is made, it is irrevocable — you can’t change your mind. If you properly disclaim, the property will pass as if you predeceased (you do not get to direct where the property goes).

 

Arden Dale,  A Strategy for Business Owners to Avoid Investment Tax (Wall Street Journal:

Financial advisers have a simple question for some of their clients who own businesses: Are you an active or passive owner?

For the clients whose businesses are set up as S corporations, the answer is crucial if they want to avoid paying a new 3.8% tax on their income.

So what’s the strategy?  Not being passive.  Easier said than done.  (via Tax Break)

 

Joseph Thorndike, A Lost Age of Fiscal Heroes? Not So Much. (Tax.com):

The looming debate over the federal debt limit is a depressing reminder that we’re living in the Age of the Manufactured Crisis. And it encourages a sort of political nostalgia – a yearning for that bygone era when tough lawmakers made the tough decisions that kept federal debt at manageable levels. Well, sorry to tell you, but there were never any fiscal heroes.

Just politicians who show by their actions that they are happy to spend us to Greece.

 

Jason Dinesen,  Same-Sex Marriage, Community Property, And Multi-State Income — Part 1.  “Indeed, some of the most complicated tax returns I’ve ever prepared have been for same-sex couples that moved from California (a community property state) to Iowa (not a community property state) during the middle of the year.”

Clint Stretch, Will DOMA Issues Doom Tax Reform?  (Tax.com)

Howard Gleckman,  The Joint Committee’s Report on Tax Reform: Must-read for Policy Geeks:

Think of it as the ballpark program you pick up before a baseball game.  You can watch the game without it, but it is much more fun if you can keep score and know a little something about who plays for the visiting team.

Except much less interesting than baseball, and the players are uglier and less skilled.

 

Kay Bell, Is the online sales tax bill unstoppable? The House will decide

Joseph Henchman,  Senate Approves Expanding State Tax Authority on Internet Sales (Tax Policy Blog)

David Brunori, Go Big or Go Home — Tax Reform in Maine (Tax.com)

Russ Fox,  California Leads the Way (as Worst State for Business).  Iowa is 23rd in the rankings in Chief Executive Magazine.

 

Jack Townsend links to an Article on Prosecuting Tax Professionals to Leverage Deterrence

Patrick Temple-West,  Airline industry’s tax troubles, and more  (Tax Break)

Robert D. Flach,  GETTING READY FOR SUMMER – FILLING OUT FORM W-4 FOR A SUMMER JOB.  With excellent advice about using a Roth IRA for your hard-working kid’s summer work.

 

The Critical Question:  How Difficult Is It to Count Tax Words? (Jim Maule)

But maybe he won’t anyway.  Maybe Mitt Romney Can Recommend a Savvy Tax Planning Professional for Al Gore (Going Concern)

 

 

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Tax Roundup, 5/6/2013: Iowa tax policy receives recognition! And – potassium forever?

Monday, May 6th, 2013 by Joe Kristan

20130117-1David Brunori doesn’t think much of the tax wisdom of the Iowa House of Representatives ($link):

The Iowa House of Representatives recently passed the Iowa Reinvestment Act, which would allow companies to keep sales tax revenue they collect rather than turning it over to the general fund as the citizens think will happen. Basically, the act is designed to allow businesses to recoup the cost of development. The state has done that before to allow the public to help finance a speedway and other projects that apparently  can’t be justified in the free market. The vote for that abomination of tax policy was 87 to 9. That’s what we call bipartisan bad tax policy.

Just more of using your money to subsidize the well-lobbied and well-connected.

Related: David Cay Johnston, Subsidies – Good News and Not So Good (Tax.com)

 

Jim Maule leaps from his blog to Tax Notes, IRS-Prepared Tax Returns: A Theory That Doesn’t Work in Practice.  (Via the TaxProf):

The idea of the IRS preparing individuals’ returns is a classic example of a theory that cannot survive in a practical  world. Like most theories, it deserved an experiment. It had that chance, in California, and it failed, with only a tiny portion of the eligible population deciding to participate.

Making taxpayers’ lives easier is a matter of simplifying the tax law, not enabling the complexities by turning tax preparation over to the IRS.

This strikes me as wise.  I just can’t imagine IRS data processing ever making this possible, considering the complexity of the income tax and the way Congress changes it all the time.

 

Brian Gongol on the Obama Administration’s proposed $3.4 million cap on retirement account accumulations:

On one hand, $3.4 million is a lot of money — nobody should doubt that. But we’re also nearly completely blind in America to how much is “enough” for retirement. Many people would say the word “millionaire” and imagine Uncle Pennybags or Uncle Scrooge. But consider this: If you wanted to get $40,000 a year in retirement income and do it just on interest payments alone (in other words, if you were trying to avoid taking anything out of your nest egg and just live on the interest), then if you had your money in “safe” 10-year Treasuries earning 1.78%, then you’d have to have more than $2.2 million in the bank. Under those conditions, “rich” doesn’t really look so rich anymore.

I don’t think the nation’s biggest problem is people saving too much.

 

Holding your breath for tax reform?  Exhale.  Martin Sullivan says tax reform is on the Fast Track to Nowhere. (Tax.com)

Donald Marron,  Immigration, Dynamic Scoring, and CBO (TaxVox)

 

Kay Bell,  5 tax tips for Cinco de Mayo

Brian Mahany,  FINRA Issues Warning On Nontraded REITs – Stockbroker Fraud Post

We have written several times about the dangers of nontraded or thinly traded REITs. They are a popular way of investing in real estate but they can be difficult to sell or liquidate if an investor suddenly needs cash.

I saw an elderly, ill client with severe cash problems while holding a private REIT investment that he couldn’t cash out.  This really does happen.  This is not a problem with widely-traded REITs, which are as liquid as any stock.

Jim Maule,  Why the “Toss Tax Records After Three (or Seven) Years” Advice is Bad.  I never throw away tax returns, and you need to keep records to support the cost of shares and big assets.  If you have loss carryforwards, you need to keep the records that support the losses as long as you are using the carryforwards.

Trish McIntire, RAL Fees in Court

Scott Hodge, In Memorial: Gordon Paul Smith.  We lose an important tax scholar.

 

Jack Townsend,  Article on Singapore Crackdown on Singapore Bank Accounts Used for Other Country Evasion

 

The tax law: is there anything it can’t do?  Scientist Pitches Proposal to Curb Bird Deaths: A Tax On Cats  (TaxGrrrl)

 

Potassium forever?  An accused embezzler apparently was in no hurry to stand trial.  From StarTribune.com:

A Texas man faces more than 16 years in federal prison for his role in a scheme to bilk nearly $400,000 from his former Eagan employer, Advantage Transportation.

Clayton “Craig” Hogeland, 43, also obstructed justice by faking a life-threatening medical condition, U.S. District Judge Patrick Schiltz found. That caused delays for both his trial and sentencing hearing.

How did he delay his trial?

Further health-related delays stretched out the trial before his conviction on Dec. 6, 2011. He was placed in custody Jan. 8, 2013, and the erratic blood potassium readings stopped. Six days later, his wife reported to federal authorities that she found in his belongings four zip-top bags of what turned out to be potassium chloride.

Despite his continuing complaints about symptoms after being jailed, tests revealed no abnormal blood potassium levels, the prosecution said.

I’m not sure this was well thought-out.   What’s the next move?  More potassium?  Maybe when you are looking at 16 years in federal prison, delay is its own reward.

 

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Tax Roundup, 5/3/2013: Return of the Glaciers edition.

Friday, May 3rd, 2013 by Joe Kristan

Tax Update World Headquarters is just a few hundred yards north of the Raccoon River, where the last glacial advance ended about 14,000 years ago.

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Downtown Des Moines, Locust St., this morning.

 Today’s weather makes me wonder whether mastodons eat tulips.

 

TaxProf,  Small Business Owners Sue IRS Over ObamaCare.  I don’t think you can stop a train wreck with a lawsuit.

 

Looking for wounded jaywalkers.  Blogger and tax defense attorney Jack Townsend is looking for “Readers of this Blog Willing to Share Their Personal Experiences in the OVDP/I Programs“:

A reporter for a nationally prominent publication has contacted me to help him get in touch with people who have gone through one of the OVDI/P programs to discuss their experiences and thoughts about the programs.  If you are interested and/or willing to do that, please contact me at jack@tjtaxlaw.com and I will put you in touch with the reporter.

So maybe it’s a chance for those of you who’ve been put through the ringer for a foot-fault violation to get a little justice.

 

Janet Novack,  Pritzker Family Baggage: Tax Saving Offshore Trusts.   My theory is that many of wealthy people who favor higher taxes assume they’ll never have to pay them anyway.

Howard Gleckman,  A New Way to Address the International Tax Mess (TaxVox)

 

Peter Reilly,  IRS Troops Will Take To The Street On Seventh Day In May .  I’m guessing that Peter is referring to the 1960′s  “Seven Days in May,” about an attempted military coup in the U.S.  I’m not sure whether the National Treasury Employee’s Union, which will “take to the streets,” can pull off a coup, seeing that they pretty much run things already.

 

Nick Kasprak,  Weekly Map: Inheritance and Estate Tax Rates and Exemption (Tax Policy Blog)

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The opposite of a sales tax holiday:  Retailer Target Jumps The Gun On Sales Tax (TaxGrrrl). A South Carolina Target store probably made few friends when it started charging a higher sales tax rate a month early.

Patrick Temple-West,  State Republicans divided on tax cuts, and more (Going Concern).

Christopher Bergin, Taxes Don’t Matter Until, Well, They Matter  (Tax.com):

 

Roger McEowen, Trusts, S Corporations, The Material Participation Test and the  Medicare Passive Income Surtax

Good news!  Are you a likely tax audit target? Sequester just might save you(Kay Bell).

Paul Neiffer:  Full Season vs. Early Season Corn

Jim Maule,  A Slight Improvement in the Code Length Articulation Problem.  No, the Internal Revenue Code is not 77,000 pages.  It’s no less a monstrosity for that.

Daniel Shaviro,  Tax policy colloquium, week 13: Itai Grinberg’s “Emerging Countries and the Taxation of Offshore Accounts”

Friday Buzz from Robert D. Flach

Me:The REIT way to reduce taxes?  My new post at IowaBiz.com, The Des Moines Business Record group blog for entrepreneurs.

Going Concern,  AICPA Attempts to Tie Expired Payroll Tax Cut to Normal American Behavior.

Are you irritable? Sleeping less? Impatient with your friends? Putting on weight? Thinking about divorce? Yes? Sorry to hear, you must be going through a stressful time.

Oh, wait, are you an American? Yes?! Whew, you’re behaving normally then. If you were to read this AICPA press release, you might be inclined to believe that your take home pay being 2% lower than last year would have been the cause of all those things…

What are these “friends” of which you speak?

 

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Tax Roundup, 4/26/2013: The Earned Income Credit elephant in the room.

Friday, April 26th, 2013 by Joe Kristan
The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.

The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.

Christopher Bergin, Dilemma – The Earned Income Tax Credit (Tax.com).  An excellent summary of the problems with the tax law’s biggest welfare program:

Our politicians have tried to do too much through the tax law. And that has created a complicated mess of winners and losers that makes the task of trying to reform it, even to some level of sensible, a daunting one.The poster child for this mess is the Earned Income Tax Credit. Like it or not, the EITC is welfare administered through the tax system. Do we really want our tax system to do that?

The tax law works best if it is seen solely as a tool to finance the government.  Much of its hideous complexity comes from using it is the Swiss Army Knife of public policy.  As you add more gadgets it becomes less useful at being a knife.

Mr. Bergin isn’t afraid to mention the elephant in the room:

And there is another huge problem. The EITC program leaks like a sieve. More bluntly and honestly stated, well-intentioned as it may be, the EITC has been corrupted. Don’t take my word for it. Recently, the Treasury Inspector General for Tax Administration released a report stating that up to one-quarter of EITC payments made in fiscal 2012 were improper. How much does that represent? Try $13.6 billion. In one year. Using a ten-year budget window, that’s $136 billion, and that’s just the tainted stuff.

Supporters say the EITC is a program that “works.”  Can you say that something “works” when it sprays billions to thieves every year?

Read the whole thing.

 

Fairness:

 But the compliance costs imposed by the Marketplace Fairness Act would place smaller upstarts at a distinct disadvantage, which is, I suspect, one reason that market incumbents such as Amazon support the tax. The real cost of taxes is not the revenue out the door to the taxman; it’s the revenue out to the door to the taxman plus all of the costs involved in complying with the tax code.

- Kevin Williamson, via Instapundit

 

Megan McArdle draws  Lessons from Curt Schilling’s Failed Business.  I would add one more: states shouldn’t finance private businesses.  Iowa hasn’t gotten the memo.

Peter Reilly,  How 38 Studios LLC Turned A CPA Into A Warrior

 

Paul Neiffer,  What About Those 1099s?!

Kay Bell,  Sony deal could help singer Lauryn Hill pay delinquent tax bill

Me: But how can we slap money launderers on the wrist if we don’t throw the book at widows?

Phil Hodgen,  How to Compute Net Tax Liability for Form 8854

Patrick Temple-West,  UK’s Cameron fights tax evasion, and more

TaxGrrrl,  H&R Block Offers Apology, Cash To Make Up For Filing Snafu

Howard Gleckman,  Will the Retirement of Max Baucus Open the Door to Tax Reform?

 

Jim Maule, When Taxes Are Cheaper:

And perhaps the short-sightedness and narrow-mindedness is compounded by  the “freedom” mentality that has taken such a hold in modern culture

Yes, let’s all get on board with the new hip “docile submission” mentality.  Because the government knows best!

David Cay Johnston,  Taxpayers Subsidize Rich Anti-Taxers (Tax.com).  Speaking up against the ALEC bogeyman.

 

It’s Friday, you aren’t being productive anyway.  Let’s Play a Game of Accountant/Not an Accountant! (Going Concern)

 

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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, 4/22/13: IRS unpaid holidays. And buying a round for the State.

Monday, April 22nd, 2013 by Joe Kristan

Sharing your drink with the state.  The Tax Foundation maps how happy your state is when you wet your whistle:

 

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Iowa is #6.

 

 

Just because an LLC is taxed like a partnership doesn’t mean that every LLC owner can act like a general partner, as Colleen MacRae explains:

Last week the Iowa Court of Appeals in Three Minnows, LLC v. Cream LLC, held that a non-managing member did not have the authority to bind an LLC to a contract the member signed on behalf of the limited liability company. 

Not every LLC member can obligate an LLC.

 

TaxProf,  IRS to Close to Public for Five Days Due To Employee Furloughs.  That doesn’t mean the Public can close to the IRS for five days, unfortunately.  Yet another example of how the preparer regulation initiative is a colossal waste of agency resources needed elsewhere.  Related: David Cay Johnston, IRS To Close for Five Days (Tax.com).

 

Peter Reilly,  IRS Not Screening Informant Reports Well .   They have other priorities than dealing with the tax collection opportunities dropped right in their laps.

 

Jim Maule,  The “Rain Tax”?

Kay Bell,  World governments mounting global effort against tax evasion.

TaxGrrrl,  As Many Celebrate 4/20, Feds Still Won’t Budge on Regulation and Taxation of Marijuana.   As long as Sec. 280E keeps even legal pot dealers from deducting expenses, it will be a tough business to make a living in, after tax.

Martin Sullivan, Horse Racing and International Tax (Tax.com)

Russ Fox,  Bayern Munich Head Reports Self for Tax Evasion.  Swiss bank accounts are involved.

Tax Trials,  IRS Announces Special Filing Extension for Boston Area Taxpayers

 

The Critical Question:  Is There Such Thing as a Free Lunch? (Ellen Kant, Tax Policy Blog)

 

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Tax Roundup, 4/19/2013: IRS agents charged with scamming jobless benefits. And post-4/15 thoughts

Friday, April 19th, 2013 by Joe Kristan

More20130419-1 evidence that preparers are out of control and need IRS employees to keep an eye on them:  24 IRS Employees Indicted for Theft of Government Benefits (TaxProf).

24 current and former employees of the Internal Revenue Service have been charged for crimes relating to fraudulently obtaining more than $250,000 in government benefits.
          
          Thirteen of the current and former IRS employees have been charged federally with making false statements to obtain unemployment insurance payments, food stamps, welfare, and housing vouchers. All thirteen, individually charged in separate indictments, are alleged to have falsely stated that they were unemployed while applying for or recertifying those government benefits.

They may have been right about being unemployed, just wrong about the timing.

 

We have to show the government our returns, so it’s only fair:  Iowa Gov. Branstad plans to show income tax returns to reporters (AP)

Howard Gleckman,  What Ever Happened to State Tax Reform? (TaxVox)

Kay Bell,  Obama’s 2012 effective tax rate was 18.4 percent; Now what do your members of Congress pay in taxes?  Make them do their returns on a live archived webcast, with a rolling comment bar.

Peter Reilly,  How Not To Care About IRS E-mail Snooping

 

William Perez,  IRS Provides Penalty Relief Due to Boston Marathon Explosion and Storms in South and Midwest

Patrick Temple-West,  Tax extension after Boston attack, and more (Tax Break)

Russ Fox, RS Gives Extra Three Months for Filing and Payments to Boston-Area Taxpayers; Massachussetts Deadline Should be the Same

TaxGrrrl,  So You Missed Tax Day, What Next?

 

Andrew Mitchel,  Code §911 Foreign Earned Income Exclusion – Adverse Conditions

Freakonomics Blog, The History of Taxes

Megan McArdle,  Our Tax Code is Too Complicated. Here’s How to Simplify It. “Get rid of the corporate income tax. It’s not worth it, and there are better ways to collect the money.”

Janet Novack,  Tax Geeks: Make Tax Filing Easy, Kill The Mortgage Deduction, Tax  CPAs

Jim Maule, Tax Compliance and Non-Compliance: Identifying the Factors

Trish McIntire,  You Need the Numbers Before You Do the Return

Scott Drenkard,  Perry Calls for Reforms of Texas’ Margin Tax (Tax Policy Blog).  It could use it.

Christopher Bergin, It Just Isn’t Fair (Tax.com):

The headline producing data  in the report was that revenue loss – about $181 billion – from corporate tax expenditures in 2011 was “approximately the same size as the amount of corporate income tax revenue the federal government collected that year.” That makes a headline grabber; here would be my version: “Corporations Got More in Tax Breaks Than They Paid in Taxes, Government Says.”

It’s almost like the tax exists only so the politicians can carve loopholes for their friends.

 

Indeed.  It’s Rarely a Good Sign When a Tax Prep Business Closes Its Doors Three Days Prior to April 15th (Going Concern)

Just plead “miseducation” and leave it at that.  Lauryn Hill asks judge for leniency in  upcoming tax evasion sentencing claiming she failed to file taxes due to threats and withdrawal from society (dailymail.com.uk)

Tony Nitti,  Girl, You Know You Better Watch Out: Singer Lauryn Hill To Be Sentenced On Tax Evasion Charges

Jack Townsend, Bank Frey Executive and Swiss Lawyer Indicted

Can you blame them?  U.S. Taxpayers Buy a Lot of Weapons  (Jeremy Scott, Tax.com)
“The sum of the square roots of any two sides of an isosceles triangle is equal to the square root of the remaining side.”  Your tax filing stress probably made you smarter (Kay Bell)

How I spent April 15.  (Marketwatch, via Going Concern).  I approve of the comment at the bottom of the GC post.

Me too.  Tax Season 2013: Mostly Unpleasant, And I’m Glad It’s Over  (Jason Dinesen)

Robert D. Flach returns!  THAT WAS THE TAX SEASON THAT WAS 2013

Me: Back to work.

 

News you can use.  Hone your corporate tax evasion skills (Boston.com)

 

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Tax Roundup, 4/10/13: Return-free filing? Mistakes not to sweat. And: W-2 Donuts?

Wednesday, April 10th, 2013 by Joe Kristan
Flickr image by Samat Jain under Creative Commons license

Flickr image by Samat Jain under Creative Commons license

Should we just get a bill from the IRS, instead of filing returns?  That’s something Janet Novack seems to be thinking about.  She has two guest posts on the issue:

Joseph Bankman, The Case For Easy, Free Tax Filing

Arlene Holen,  Five Fallacies About Return-Free Tax Filing

Some people fear return-free filing will separate citizens further from the costs of government.  I think that is caused by an income tax that now is effectively only on high-income earners.  When 51% can send the bill to the other 49%, bad policy seems inevitable.

 

Mistakes, mistakes.  The IRS has issued a list of “Common Errors to Avoid,” ably covered by Jana Luttenegger (Common Errors to Avoid in Tax Returns) and TaxGrrrl (Eight Common Tax Filing Errors And How To Prevent Them).

It makes me wonder: if there are “Errors to avoid,” are there errors we should seek out, or at least not sweat?  I can’t think of errors I’d want to make on a tax return, but I can think of some that I wouldn’t lose sleep over:

1. Forgetting to check the “presidential election campaign fund” box.  After all, your entire tax bill is basically the federal election campaign fund.

2. Misspelling the name of a stock on Schedule D.

3. Writing a “smiley face” next to the tax refund line.

4. Forgetting to update your “occupation” on the signature line when you change jobs.

Any other ideas?

 

Kay Bell, Tax returns, refunds running behind last year’s levels

Peter Reilly, GLAD Alerts Same Sex Couples To Act Quickly To Preserve Refund Rights

Clint Stretch, Are Roth IRAs Your Best Choice? (Tax.com)  I think that they are if you can’t get a deduction, but not otherwise.

Russ Fox,  Bozo Tax Tip #3: Use a Bozo Accountant!

Day traders have their own April 15 deadline.  Yesterday’s 2013 filing season tip.  Today’s tip goes up later this morning.

 

Jack Townsend, Lies, Dams Lies and Statistics – DOJ’s Promo Stats.

Jim Maule,  How To Protest a Tax: Part Two.  It involves dance.  If it makes Prof. Maule bust a move, it’s worth it!

Tony Nitti,  The Masters: A Tax Break Unlike Any Other.  The tax-free Masters windfall for Augusta homeowners.

David Brunori, Prohibition Through Taxation (Tax.com).  If you jack up taxes beyond reason, people cheat.

Howard Gleckman, An Opportunity to Really Fix Social Security (TaxVox)

 

 

No jest. Shirley man pleads guilty in multimillion-dollar tax fraud scam (Newsday)

No, it’s not me. West Des Moines Man Banned from Bar Until He Can Pay Tab (West Des Moines Patch)

 

Megan McArdle, There’s No Such Thing As A Free Lunch in Taxland.

The core problem is that the IRS cannot look into the hearts of companies and see which of them really needs to provide free lunch to their employees in order to have a healthy, vibrant company, and which of them is doing this in order to provide a tax-free boon to their workers. 

In case anyone asks, donuts are critical to a healthy, vibrant tax practice.

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Tax Roundup, 4/5/2013: Illegally Blonde edition. And: Vaudtitor vacates.

Friday, April 5th, 2013 by Joe Kristan

20130405-1So a Blonde and a lawyer walk into Tax Court.  She loses.

No, the Tax Court has not started to report petitioner hair color in its decisions, along with the names of the attorneys and the resident state (“petitioner resided in Iowa and was brunette during the tax years at issue but gray at trial”).   This taxpayer’s first name is actually Blonde.  And she was an attorney, at least until 2006, when she pleaded guilty to failure to file tax returns. From the Tax Court:

Since the only issue currently before the Court is whether Blonde Grayson Hall signed the Form 4549 under duress we will refer to Blonde Grayson Hall as petitioner.

Petitioner attended the University of Michigan Law School and was admitted to practice law in 1982. Petitioner was the chief executive officer of Hall & Associates, LLC, a law firm in Philadelphia, Pennsylvania, from 1995 to 2006.

As part of her plea deal, the taxpayer filed Form 4549 agreeing to assessment of additional tax liabilities for several tax years.  She apparently had second thoughts:

Thus, the issue before us is whether Blonde Grayson Hall should be relieved of her agreement in the Form 4549 because it was signed under duress.

Of course, duress is what a plea deal is all about.  You accept a bitter pill because you think it could get a lot worse if you go to trial.  While this is a fearsome and sometimes abused weapon in the hands of prosecutors, the Tax Court said it wasn’t the kind of duress that makes the Form 4549 go away (my emphasis):

The requirement that petitioner sign the Form 4549 stems from the Government’s efforts to prosecute her for admittedly criminal conduct and to collect taxes and penalties. No doubt, given the circumstances, these efforts were zealous and disadvantageous to petitioner. However, every criminal defendant who is offered a plea agreement faces an equally unpalatable decision — accept a legally authorized plea agreement that will include terms disadvantageous to the criminal defendant or go to trial which may result in significantly worse consequences for the criminal defendant. This unpalatable decision does not constitute duress or involuntariness.

The taxpayer is stuck with the Form 4549 that she signed.

The moral: If you plead guilty to criminal tax charges, it is very hard to fight the assessment for the years covered by the plea.  Even if you are a lawyer, and even if you are Blonde.

Cite: Hall, T.C. Memo 2013-93.

 

Iowa’s loss, Government accounting’s gain.  Iowa’s longtime State Auditor David Vaudt is leaving office to head the Government Accounting Standards Board.  He’s fought the good fight for honest reporting of state finance.  It will be hard to find a replacement as good.

His term in office has covered governors of both parties, all of whom found him more or less annoying with his objections to budgetary games.  His office did excellent work in the film credit scandal, issuing a comprehensive report showing that 80% of the credits were improperly granted.  Best of luck to him in his new job.

 

William McBride,  Standard Economics Says Capital Income Taxes Should Be Zero (Tax Policy Blog).  He quotes Garett Jones:

Under standard, pretty flexible assumptions, it’s impossible to tax capitalists, give the money to workers, and raise the total long-run income of workers.    

Not, hard, not inefficient, not socially wasteful, not immoral: Impossible

Yet the effort to do so never ends.  Nor the harm it causes.

 

Christopher Bergin, ‘Commissioner-Less’ (Tax.com):

The Internal Revenue Service is currently without a Commissioner. Douglas Shulman, the 47th IRS Commissioner stepped down last November.And from what I’m starting to hear, the IRS may not have a new Commissioner for as long as close to two years. That is not a good thing.

Still an improvement over the last one.

 

Eric Todor, Moving to a Territorial Tax May Not Be the Windfall Multinationals Expect (TaxVox)

David Cay Johnston, Unkind to Charity (Tax.com) “The tax rules on charities, both the many good and the few bad, are about to get much more anti-giving.”

 

Jack Townsend, District Court Denies Bankruptcy Discharge for BLIPS Shelter Investor

Kay Bell, William Shakespeare, tax cheat

William Perez, GoodApril Online Tax Planning Application

Perverse incentives.  Whoa, Cowboy: Tax Laws May Make Romo Highest Paid NFL Player (TaxGrrrl)

 

News you can use: You Are a Terrible Investor and You Should Stop That (Megan McArdle).  Actually, it’s excellent advice that I try to follow.

Russ Fox,  Bozo Tax Tip #6: Just Don’t File.  It sure didn’t work for the Blonde.

Jim Maule,  How to Protest a Tax:

According to this report,  dozens of people supporting a bill to repeal a state sales tax on amounts charged by dance establishments decided to dance in protest. According to the report, the protestors demonstrated the salsa, the flamenco, the tango, and even a conga line. Considering the speed with which legislatures get things done, perhaps they engaged in some slow dancing, though the report does not mention it.

First they came after the big bands, but because I was a conga dancer, I did nothing.

 

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Tax Roundup, 3/25/2013. Three weeks to go. And Cargo Cults!

Monday, March 25th, 2013 by Joe Kristan
Ceremonial cross of John Frum cargo cult, Tanna island, New Hebrides (now Vanuatu), 1967 (via Wikipedia)

Ceremonial cross of John Frum cargo cult, Tanna island, New Hebrides (now Vanuatu), 1967 (via Wikipedia)

Heresies of the Cargo Cult.  When some remote societies encountered the industrial world in World War II, they had trouble grasping what they were seeing.  Wikipedia explains:

Cargo cult activity in the Pacific region increased significantly during and immediately after World War II, when the residents of these regions observed the Japanese and American combatants bringing in large amounts of matériel.   When the war ended, the military bases closed and the flow of goods and materials ceased. In an attempt to attract further deliveries of goods, followers of the cults engaged in ritualistic practices such as building crude imitation landing strips, aircraft and faux radio equipment out of bamboo or whatever materials they had at hand, and mimicking the behavior that they had observed of the military personnel operating there.

While it’s easy to mock an islander for building a refrigerator-like box in hopes of conjuring up an icy six-pack, cargo cult behavior also occurs in modern societies.   Without describing it as such, tax historian Joseph Thorndike writes about the cargo cult of the 1950s, where modern policy wonks try to conjure up 1950s-style growth through a ritualistic process of duplicating tailfin-era totems.  For example, Timothy Noah thinks the crushing stated top marginal rates of that era might help generate those Happy Days results.  Mr. Thorndike sees problems with that approach:

We still don’t know if high statutory rates and (relatively) high average rates were a drag on growth. And we can’t know, because we also can’t know what growth might have been in a different tax climate.

Moreover, a range of nontax factors were probably more important in shaping growth patterns in the 1950s. In particular, the economic disruptions of World War II had left the United States in a uniquely dominant position; by one estimate, U.S. manufacturing output constituted 60 percent of the world’s total in 1950.

In other words, it takes more than a bamboo box to conjure up that beer.

After all, the tax system of the Eisenhower era was not a very good one: It paired notionally sky-high rates with a deeply flawed tax base and created distortions both coming and going.

I understand that progressives like Noah are fighting a different battle: They are trying to beat back the rate-cutting mania that often serves as a definition of tax reform these days. But I think we might take a lesson from the tax experts of the 1950s, who understood the problems bedeviling their own tax system. As economist Harold Groves said at the time, “The impression is widely shared that the Congress deliberately throws a high-rate scale to the public as a demagogic bone and then as deliberately allows escapes from taxes that makes these rates specious.”

Mr. Thorndike is more sympathetic to high rates than I ever will be.  Doing taxes for a living, I see first-hand how high rates affect behavior, and I have no patience for academics who say otherwise.  But he wisely notes that simply trying to recreate the totems of the 1950s, like high tax rates, misses all of the other things that put cold beer in the refrigerator.  Same thing goes for other 1950s fetishes like tail fins, industrial unionism and defined benefit pension plans.

 

 

To serve and protect.  Former Pittsburgh Police Chief Charged with Conspiracy, Failure to File Federal Tax Returns (FBI Press Release):

Former Pittsburgh Police Chief Nathan E. Harper has been indicted by a federal grand jury in Pittsburgh on charges of conspiracy and willful failure to file income tax returns, U.S. Attorney David J. Hickton announced today.

The five-count indictment named Harper, 60, of Pittsburgh.

According to the indictment, Harper was the chief of the city of Pittsburgh Police Department. From 2009 to 2012, he caused at least $70,628.92 in checks and cash received by the special events office of the department to be diverted to two accounts at the Greater Pittsburgh Police Federal Credit Union. Using Visa debit cards, Harper obtained more than $31,000 in ATM withdrawals and debit purchases, all for his personal benefit. Harper also failed to file federal tax returns for the years 2008 through 2011.

If he’s convicted, maybe the special events office can throw a little party for the occasion.

 

What could possibly go wrong?  James Timothy Turner was convicted last week of masterminding a cunning plan.  DothanEagle.com reports:

According to a U.S. Department of Justice press release, Turner was convicted of conspiracy to defraud the U.S., attempting to pay taxes with fictitious financial instruments, attempting to obstruct and impede the Internal Revenue Service, failing to file a 2009 federal income tax return and falsely testifying under oath in a bankruptcy proceeding.                           

The FBI began investigating Turner in 2010 after he and three other people sent packages to all 50 governors demanding they leave office.                           

Turner is the president of a group of what prosecutors called “sovereign citizens” known as the “Republic for the united States of America.”

Send “packages” to all of the governors telling them to resign?  Well, at least they weren’t trying to hide what they were doing.

Turner toured the country in 2008 and 2009 teaching seminars that instructed attendees how to submit bonds to pay off tax debt.                           

According to prosecutors, these bonds were completely fictitious and often written for amounts in excess of $1 billion.

Silly man.  Only the Federal Reserve can do that.  Unless we’re talking about the $1 trillion magic coin

 

Every theater needs a dirctor, including economic development theater.  Economic development director accuses senator of engaging in “political theater” over Orascom deal (O. Kay Henderson, via TheBeanwalker)

 

William Perez,  Penalty Relief Available for Some 2012 Federal Tax Returns

Jack Townsend,  Ethicist Question About Tax Professionals Exploiting Loopholes:

So, for those tax professionals engaging in such transactions that they know violated a known legal duty, their conduct is illegal and unethical.  For those transactions engaging in such transactions where they don’t know (perhaps are willfully ignorant) that the conduct is illegal (ultimately most of the b—-t tax shelters are found to be
illegal), then at least the ethical issues arise.  These are smart professionals, paid (supposedly) to predict what a court will do with the b—–t tax shelter.  Yet, in the prominent civil cases that swat down b—–t tax shelters, they fail miserably in their predictions.

 

Kay Bell,  A tax lawyer has ethical problems with tax loopholes

Janet Novack,  How Much Tax Will You Owe On A $320 Million Powerball Jackpot? A Lot More Than In 2012 .  I knew I should have arranged to win that Powerball last year.

Jim Maule,  Tax Meets the Chicken and the Egg

Trish McIntire,  Extensions

Patrick Temple-West,  Athletes’ tough tax bills, and more

TaxGrrrl,  Senate Passes Budget, Calls For Nearly $1 Trillion In Tax Increases

You are required to go to the party.  The Affordable Care Act Turns 3 (Richard Morrison, TaxVox).

 

The Critical Question: Who Will Play Margaret Fuller When The Movie Comes Out ?  (Peter Reilly)

Tony Nitti, IRS Employees’ Star Trek Parody Is As Wonderfully Awful As It Sounds

Russ Fox,  To Boldly Go Where No IRS Employee Has Gone Before…

You mean it’s not a documentary?  IRS Releases Gilligan’s Island Parody Training Video (TaxProf).

Frankly, they don’t give a dam. Beavers defiant after convicted of tax evasion (Chicago Tribune)

 

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Tax Roundup, 3/22/2013: IRS makes it easy for many taxpayers to pay late. And Beavers at the end of the pond.

Friday, March 22nd, 2013 by Joe Kristan

20130322-1IRS waives late payment penalties for returns containing delayed forms.  If you can’t file or pay taxes on time, it’s always better to extend your return while you round up the information or the cash.  The penalty for filing a late unextended return is 5%, plus an additional 5% for every additional month of late filing.  The penalty for paying late on a timely extended return, in contrast, is only 1/2%, plus 1/2% per additional month.

  While penalties will be waived, the IRS will charge interest on amounts paid after the deadline.

The notice has a complete list of forms that allow taxpayers to qualify for the late payment exception.  The most commonly-seen ones are probably Form 4562, for depreciable assets and the section 179 deduction, and  Form 8582 for passive activities.

By issuing this notice early, the IRS has also given taxpayers a planning opportunity.  If you have a big balance due on April 15, and you have one of the qualifying forms, you now are eligible for what amounts to a low-interest loan for up to six months, until the October 15 extension deadline.   Many taxpayers accelerated income into 2012 to beat the 2013 tax hikes, and they loan might come in handy.  The current IRS interest rates:

  • three (3) percent for underpayments;
  • five (5) percent for large corporate underpayments

But if you have the cash, you probably want to pay up on April 15.  There aren’t many places left where you can get a 3% after-tax return on your money for six months.

 

In a just world, they could sue Congress and the IRS.   TurboTax, other Intuit products, now OK to use in Minnesota; H&R Block facing lawsuits over filing snafu, refund delays (Kay Bell)

The tax law is still broken, though.  Minnesota Revenue Department Announces TurboTax Problems Have Been Fixed (William Perez)

 

William McBride, UK Dropping Corporate Rate to 20 Percent, Half the US Rate (Tax Policy Blog).  It makes a difference.

Peter Reilly, International Flight Attendant Does Not Score As Well As Sergio Garcia In Tax Court

Ben Harris,  Automatic Retirement Saving Inches Forward (TaxVox)

 

Roger McEowen, Another Development In The Tax Implications of Insurance Company  Demutualization

Janet Novack, New Study Using IRS Tax Data Shows Rich Are Staying Richer, Poor Poorer

Jim Maule,  So How Does This Tax Plan Add Up?

Howard Gleckman,  Why the Tax Cuts in the Senate Budget Don’t Add up (TaxVox)

David Cay Johnston, Level Playing Fields Under Attack(Tax.com).  Because we don’t want Wal-Mart to be at the mercy of some guy selling stuff from his basement.

Patrick Temple-West, Senate votes on tax hikes in budget, and more (Tax Break)

TaxGrrrl, You Are Not Alone: R. Kelly Joins Taxpayers Who Have Lost Homes Due To Foreclosure.  I’m sure that makes other foreclosed folks feel better.

 

The road not taken.  I left a national accounting firm to start a new firm.  A (purported) alumna of the same firm took a somewhat different path. (Going Concern)

Guilty.  Dam Guilty. Beavers Convicted: Loans Require Payback  (Russ Fox).

 

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Tax Roundup, 3/20/2013: Bury the RV scofflaws in subsidized fertilizer, but remember the Maine!

Wednesday, March 20th, 2013 by Joe Kristan

20130320-1Iowa cracking down on RV tax scofflows?  Southwestiowanews.com reports:

Iowa lawmakers are putting the brakes on those who avoid paying registration fees when buying expensive vehicles.    

Under a bill recently approved by the Senate, tax evaders using so-called out-of-state shell corporations to avoid paying registration fees on RVs or other luxury vehicles will face criminal charges and penalties.

Going to jail to save a few bucks on your vehicle registration seems like a bad bet.

 

More fertilizer!  TheGazette.com reports Iowa, Illinois may have bidding war to land new fertilizer plant:

The (Decatur) Herald & Review reports that, according to Illinois officials, Iowa is offering Cronus Chemical LLC an estimated $35 million in taxpayer subsidies to build a plant in Mitchell County near the Minnesota border.

Illinois lawmakers are considering tax breaks in a proposal by state Rep. Adam Brown, a Republican from Champaign. The plant would be built near Tuscola in the east central part of the state.

Hey, Iowa Economic Development people:  Illinois is brokeBustedPlayed out.   They’re not bidding.  We don’t need to be bribing fertilizer plants to come here.  Instead give us a tax system that’s not so awful that we have to pay people to like us.

 

 

 

Jason Dinesen,  Why Would Any Enrolled Agent Support the RTRP Program? :

It baffles me that the National Association of Enrolled Agents is so in love with the RTRP program.

In their weekly newsletter to EAs last week, NAEA bizarrely referred to the unlicensed preparers who brought suit against the IRS over the RTRP program as people who want “the right to remain incompetent.”

NAEA also kissed the government’s butt by praising the “serious and vigorous” IRS attorneys who are appealing the court ruling that struck down the RTRP program. The flowery kissing-up continued as NAEA went on to opine that the government “delivered its A-game” in the appeal.

I have never seen anything good for enrolled agents in the IRS preparer regulations.  Enrolled Agents have been around a long time, and they have to meet much higher standards than the RTRPs would.  Yet the EA designation is not well understood by the public, and having the IRS officially sanction a lesser credential will probably make it even harder for EAs to get their story out.

 

William McBride, Tax Policy Center Espouses Minority View on Capital Income Taxes (Tax Policy Blog):

The preponderance of evidence points to corporate taxes being the most harmful to economic growth, followed by personal income taxes, consumption taxes, and property taxes.  Notice a pattern?  The corporate tax is the largest tax on capital income in most countries, while the personal income tax is the largest tax on labor although it also taxes
capital. 

He’s referring to this post we linked on Monday.

 

Jeremy Scott, Paul Ryan Borrows a Page From Obama’s Playbook (Tax.com): ” Much like Obama, Ryan keeps releasing the same budget every year, knowing full well that it has no chance of becoming law.”

Howard Gleckman, What the Tax Policy Center Really Said About the Ryan Budget (TaxVox).  “To the Democrats who so enthusiastically embraced our analysis, thank you for your support.  However, we did not say what you wish we had said.”

 

Jana Luttenegger,  Does the IRS Have Your 2009 Refund? (Davis Brown Tax Law Blog)

Kay Bell,  13-plus ways to cut your taxes without itemizing

Paul Neiffer,  Don’t Forget Farm Income Averaging.  Another break for farmers that nobody else gets.

Jim Maule, The Aggravation of Tax Paperwork

Peter Reilly, Only Modest Valuation Discounts Allowed On Estate Artwork

TaxGrrrl, States, Local Governments Consider Aggressive Tax Collection Efforts To Plug Budget Holes

Joseph Thorndike, It’s Not Too Late for a War Tax (Tax.com)

 

The Ellen DeGeneres constituency.  I thought it funny to see Peter Reilly’s Ellen DeGeneres Speaks Out For Spanish-American War Widowers But it’s not as far-fetched as I thought.  From today’s Des Moines Register:

There are 10 living recipients of benefits tied to the 1898 Spanish-American War at a total cost of about $50,000 per year.

The Civil War payments are going to two children of veterans — one in North Carolina and one in Tennessee — each for $876 per year.

Remember the Maine!

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Tax Roundup, 3/15/13: Corporate return day! And: Can you audit a myth?

Friday, March 15th, 2013 by Joe Kristan

Calendar-year corporation returns are due today! They are easy to extend on Form 7004 if you can’t finish them today.  If you don’t extend an S corporation return and you file late, the penalty starts at $195 for each late K-1, and $195 each for every additional month the return is late.

 

If Iowa's tax law were a car, it would look like this.

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

Joseph Henchman,  Iowa House Passes Alternative Maximum Tax: Income Tax Option Clear of Carveouts (Tax Policy Blog).  Joseph has some good things to say about the Iowa alternative tax that passed the house this week (HF 478):

I’ve never filled out an Iowa income tax form but it looks like one of the harder state tax returns. Iowa allows you to deduct what you pay in federal income tax, which is nice but is that much more calculation work (and probably drives up tax rates). There are lines for the lump-sum tax, the minimum tax, the K-12 textbook credit, the school district surtax, the motor fuel tax credit, and the earned income tax credit. I’m sure each one of these has their explanations of necessity but together it sounds like a lot of paperwork, record-keeping, and Tax Filing Day frustration.

Hence, I’m impressed by a bill passed yesterday (House File 478)  by the Iowa House which would offer an alternative to all Iowa taxpayers: a 4.5 percent tax on all income above about $15,000, which no further deductions or exemptions. It’s not perfect: our friend Joe Kristan pointed out that a credit for taxes paid to another state and a deduction for federal interest are probably constitutionally required, and offsetting deductions to certain kinds of income (allowing gambling losses if you tax gambling winnings) is good policy. But as Joe said, the bill “is a welcome step towards improving Iowa’s income tax.”

I’m hoping it’s a step towards the Tax Update Quick and Dirty Iowa Tax Reform Plan.

 

 

It’s a myth, so they’re cracking down on it!

Huffington Post, The Millionaire Migration Myth: Don’t Fall for This Anti-Tax Scare Tactic.

Bloomberg News, States Crack Down on Top Earners Who Flee as Levies Rise: Taxes

If they feel have to “crack down” on something, maybe there’s something to that myth.

 

The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.

The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.

Janet Novack,  Blame Congress, As Well As H&R Block And IRS, For College Tax Credit Mess. Oh, I do!  From the article:

Far be it from me to let either the Internal Revenue Service or tax prep giant H&R Block off the hook for the current mess which has delayed refunds for more than 600,000 taxpayers claiming college tax credits by up to eight weeks. In addition to their operational missteps, both did a poor job (at least  initially) of communicating with taxpayers who desperately need those refunds to pay tuition or other bills.

But let’s put some of the blame where it rightly belongs: on the Washington politicians. For more than two decades, Congress has been expanding  “tax expenditures” with little regard for how complicated such provisions might be for taxpayers to use and for the IRS to administer,  let alone for whether they do enough good to justify their cost and the economic distortions they create.  A new 1065-page Congressional Research Service compendium lists 250 different tax expenditures. Happy reading.

Every little break like this diverts IRS resources from actually collecting income taxes and makes the income tax a little less effective and useful.  Yet Congress still sees the tax law as the Swiss Army Knife of public policy.

 

Jim Maule,  Tax Depreciation: Do the Math:

No matter how well a student in the basic tax course masters the depreciation deduction to the extent it is studied, that student knows that the total depreciation with respect to a property cannot exceed its cost. All of the students would find themselves bewildered by the proposition that depreciation deductions on a property that cost $34,799 would total $56,000.

So was the Tax Court.

 

Tony Nitti,  Golfer Sergio Garcia Comes Up Short In Tax Court, But Is The Decision A Victory For Other Athletes? He won on his endorsement royalty income, so while he may not have had an undisputed win, he did OK, like a PGA golfer who gets second-place prize money.

 

William Perez,  Delays in Issuing Tax Refunds Related to Education Tax Credits

Going Concern,  IRS Won’t Be Sorry If You Never Get Around to Claiming Your Refund.  Over $900 million in 2009 refunds will be out of reach of their rightful recipients after April 15, when the 3-year window for claiming them expires.

Trish McIntire, Don’t Lose Your 2009 Refund

 

Paul Neiffer,  Will Large Farmers Be Able to Use Cash Method in the Future?!  Farmers should get the same tax rules and breaks everyone else does, no less and no more.

Kay Bell,  Will a relationship neutral tax code save traditional marriage?.  Not every problem is a tax problem.

Howard Gleckman, The Ideological Chasm Between the House and Senate Budgets

William McBride, Dave Camp Floats a Rewrite of Small Business Tax Rules (Tax Policy Blog)

 

Jack Townsend, U.S. Taxpayer Pleads to FBAR and Tax Perjury Violation

Brian Mahany, IRS Agent May Be Headed To Prison For Info Leak – Whistleblower Protection

Brian Strahle, State Tax Revenues:  Corporate Income Tax Not That Important?

Oh, Goody.  Applying for Obamacare Subsidies Will Be as Complicated as Doing Your Taxes (Megan McArdle)

 

Argo pay your taxes.  It turns out Iowa isn’t the only government whose film tax credits attract scammers.  From London comes this via Boston.com:

In some ways ‘‘A Landscape of Lies’’ was a typical indie film, with a tiny budget, a B-list cast and an award from an American film festival.           

What made it special is that it was created solely to cover up a huge tax fraud.

In fact, officials say, the project was a sham, set up to claim almost 1.5 million pounds in goods and services tax for work that had not been done, as well as 1.3 million pounds under a government program that allows filmmakers to claim back up to 25 percent of their expenditure as tax relief.

No word on whether Leo Bloom prepared the fraudulent returns.

 

News you can use: Polish Up Your Guccis. (Christopher Bergin, Tax.com).

Will there be tax reform? I think there has to be. But I don’t think it will look like theTax Reform Act of 1986 because, in short, it’s not 1986, and we don’t have the same problems or even the same tax system. That doesn’t mean there aren’t a lot of lessons to be learned from the ’86 experience. But I don’t think tax reform will happen soon. And a few of the reasons I think that come right out of “Gucci Gulch.”

I have a copy of Showdown at Gucci Gulch, the book about how the 1986 tax reforms were enacted.  I haven’t brought myself to open it; it seems too much like reading about my job.

 

TaxGrrrl,  Arrest of Dancing Mascot Puts Liberty Tax Wavers In The Spotlight

He should have hidden the cash across the pond.  Opening statements underway in Beavers tax evasion trial (WGNtv.com)

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Tax Roundup, 3/11/2013: Five weeks left edition. And Accumulated Earnings Tax agitation.

Monday, March 11th, 2013 by Joe Kristan

20130311-1The 1040 filing deadline is five weeks from today.  The 1120 and 1120S deadline is this Friday.  The penalty for filing an 1120-S late is $195 per shareholder, with the penalty repeated each additional month the return is late.  Proceed accordingly.

 

A Des Moines tax lawyer lets us know what we are in for:  Just a Little Bit More? Yeah Right. Get Ready to Pay More Taxes in 2013 (William Brown).  He illustrates what will happen to one of his clients, “Fred,” when he pays his 2013 taxes:

Fred’s federal taxes have increased by 9% with no change in his earnings.  If Fred does not increase his distributions from his business to pay these increased taxes, his disposable income will decrease by 19%.  Might these increased taxes have no substantial impact on the prospects of his small business and its employees?  Not a chance.

Read the whole thing.  Related:  Phil, we have altered the deal.  Pray we don’t alter it further.

 

David Cay Johnston pushes for harsher accumulated earnings tax.  As I predicted, we’re starting to see people pushing for enforcement of the Accumulated Earnings Tax to deal with the pretend problem of corporations “hoarding” cash.  Mr Johnston takes the podium in an (unfortunately gated) article in Tax Notes:

     American nonfinancial corporations held more than $2.2 trillion of cash and near cash offshore at the end of 2010 in current dollars, IRS and Federal Reserve data shows. And that is on top of the almost $1.7 trillion of liquid assets owned by firms and subsidiaries with U.S. addresses that we will see when the 2012 corporate income tax data becomes available in a few years. That global cash and near cash pile of almost $4 trillion came to $12,600 per American — well more than triple the $3,500 in per capita federal income tax revenues that year.

     There is no possible business justification for that much cash. As Tax Court Judge David Laro wrote in Haffner’s Service Stations Inc. v. Commissioner, T.C. Memo. 2002-38  “a need to retain earnings must be directly connected with the needs of the corporation itself and must be for bona fide business purposes.”

No “possible” business justification for that much cash?  It’s pretty easy to come up with potential justifications.  If you are a corporation sitting on a lot of cash, you have a lot to think about.   You have unusual opportunities, which you need to evaluate carefully.  The imposition of the shareholder-level tax on earnings is certainly a factor.  Does that mean I trust corporate management and boards?  No.  But I trust them a lot more than second-guessers at the IRS.

The Judge Laro cite that Mr. Johnston uses only restates the legal background of the accumulated earnings tax — not the economics of it.

If you want to really encourage corporations to free up their cash, end the double-taxation of corporate income by allowing full deductibility of dividend payments — with an excise withholding tax on non-profit and non-U.S. distributees to ensure the income is taxed once.  That will give corporations a powerful incentive to distribute cash they aren’t using – one that will work a lot better than beefing up the IRS Second-Guess Division.

Update: Mr. Johnston e-mails:

            I have written in favoring of restoring tax-free dividends for modest sums or encourage savings, partly because most Americans have little saved in the tax system and even though only one in four gets dividends directly: [$link Ed.]

And I called for a two-year test of dividend deductions in this column a few months later, arguing that dividends have the virtue of separating actual value-added managers from those who play accounting games since you need need cash to make dividend payouts. [gated links here and here. Ed.].

Unfortunately I don’t have links to free versions of the original articles.

Related: Garett Jones,  Redistributing from Capitalists to Workers: An Impossibility Theorem, on why the economically-optimal rate of tax on capital is zero. (Econlog)

 

 

No more paper Internal Revenue Bulletins.  The IRS has discontinued its old paper Internal Revenue Bulletin, where it published tax guidance.  From Announcement 2013-12:

The IRB is available on IRS.gov before printed copies are available. Also, the majority of items (about two-thirds) that appear in the IRB are released with a News Release about a month ahead of when the item appears in the IRB. Since all items in the IRB are available electronically, almost a month in advance of being available in the printed IRB, we are eliminating the printing of paper copies of the IRB, which are distributed directly from the IRS. The cost savings to printing and postage would be $148,000 annually.

It makes sense.  Another bit of my accumulated tax training goes the way of the Dodo.

 

Russ Fox,  If You’re a Sole Proprietor, Get an EIN…Now!.  Otherwise it’s too easy to get your identity stolen.

William Perez,  Minnesota Revenue Department Finds “Unacceptable” Errors in TurboTax.

TaxGrrrl, IRS Explains Delays In Processing Some Returns Claiming Education Credits

Kay Bell,  Federal workers owe $3.5 billion in back taxes; Expect renewal of legislative efforts to fire federally-employed tax debtors.  Some people don’t buy the “better to give than to receive” thing.

Brian Mahany,  IRS Begins Rejecting OVDI Filings – Important News For Fence Sitters

Jack Townsend,  Bank Leumi U.S. Clients Rejected from OVDP

Robert Goulder: Taxation & Morality: Odd Bedfellows (Tax.com)

 

Peter Reilly,  Render Unto Caesar – Mormon Tithe Not A Necessary Expense In IRS Collection Case

Patrick Temple-West,  Tax haven hunter Levin to retire, and more

 

The Critical Question: Who Are Your Tax Policy Friends? (Jim Maule)

Going Concern,  No, We Can’t Help You Pass the Ethics Exam.  When I took it, it was mailed to successful CPA candidates to do at home and mail in.  No wonder there are no ethical problems with our generation.  Oh, wait…

 

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