Posts Tagged ‘maule’

Tax Roundup, 2/24/14: WSJ highlights tax season ID theft. And: Shock! Film Tax Credit Corruption!

Monday, February 24th, 2014 by Joe Kristan
The "Chromaro" purchased with ID-theft frauds by a Florida thief.

The “Chromaro” purchased with ID-theft frauds by a Florida thief.

The Wall Street Journal covers identity theft today: “Identity Theft Triggers a Surge in Tax Fraud”   It seems to be designed to tell what a great job the authorities are doing to fight the problem.  It’s nice that they’re stepping up the efforts, but the time to do that was four years ago, when the problem started exploding.  But the IRS was too busy with its attempt to regulate practitioners to be bothered with keeping billions from going out the door to two-bit grifters.  The article refers delicately to the grifters:

The scam, which involves repeatedly filing fake tax returns electronically and receiving refunds within days, is so enticing it is attracting suspects not typically associated with white-collar crime. On Friday, two members of an alleged crack-dealing gang in Miami were indicted on charges they also ran a tax-refund scam on the side. Suspects typically steal lists of names and Social Security numbers. Then they file large numbers of electronic returns claiming refunds, and can start getting money before investigators spot the fraud.

The story notes that stealing from the taxpayers is only part of the damage caused:

The crime creates two victims—the U.S. Treasury and individual taxpayers, who only learn of the fraud when they try to file their legitimate returns. Those taxpayers are stuck with the hassle of proving to the IRS that the previous document was a phony claim.

And the process can drag over years, as an ID-theft victim who works with Jason Dinesen would attest.   It’s a disgrace that the IRS has done so poorly at preventing ID theft, and it is doubly disgraceful that they don’t do a better job helping the victims of IRS negligence.

For your part, don’t help the ID thieves.  Never disclose your social security number.  Keep your tax information secure.  Don’t transmit your social security number in an unencrypted email.  If you want to transmit tax documents electronically, don’t send them as an email attachment.  Use a secure file transfer site, like our FileDrop site.

 

haroldDon’t let the door hit you.  ‘House of Cards’ threatens to leave if Maryland comes up short on tax credits (Washington Post, via Politico):

A few weeks before Season 2 of “House of Cards” debuted online, the show’s production company sent Maryland Gov. Martin O’Malley a letter with this warning: Give us millions more dollars in tax credits, or we will “break down our stage, sets and offices and set up in another state.”

That’s the problem with paying people to be your friend.  The price only goes up. In California, the film credit scam industry may be losing a friend, according to Capital Public Radio: Calderon Indicted On Fraud, Bribery Charges:

The Department of Justice announced Friday that State Sen. Ron Calderon (D-Montebello) is facing 24 federal charges including bribery, wire fraud and money laundering. U.S. Attorney Andre Birotte said Calderon solicited and accepted $100,000.

“Ron Calderon, we allege, took the bribes in return for official acts. Such as, supporting legislation to those that would be favorable to those that paid him bribes and opposing legislation that would harmful to them. The indictment further alleges that Calderon attempted to convince other public officials to do the same.”

~Andre Birotte, U.S. Attorney

The legislation centered on a potential film tax credit and regulation of medical billing. Calderon is accused of accepting cash, trips, dinners and jobs for his children.

I think film tax credits, and all incentive tax credits, are fundamentally corrupt, as they provide better treatment for the well-connected at the expense of everyone else. In Iowa, though, they were able to rely on credulous legislators, without resorting to bribes.

Russ Fox, California State Senator Ron Calderon Indicted on Bribery & Tax Charges.  “Mr. Calderon is facing a maximum of 396 years at ClubFed if found guilty on all charges.”

 

premier.gov.ru [CC-BY-3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons

premier.gov.ru [CC-BY-3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons

A victim of politically motivated tax prosecution goes free in Ukraine: Freed Ukrainian ex-PM Tymoshenko rallies protesters (CBC).  She had been imprisoned on politically-convenient tax charges by the toppled would-be dictators there.   With the complexity of the tax law, it is way too easy to indict somebody.  That’s why IRS partisanship is so dangerous.

And yes, it can (and has) happened here.

 

 

 

William Perez has the scoop on Reporting Investment Income and Expenses

Jana Luttenegger, Taxing Olympic Winnings.  (Davis Brown Tax Law Blog) Not a problem for the hockey team.

Kay Bell is right when she says Report all your income even if you don’t get a 1099.  The 1099 is a useful reminder, but income doesn’t become tax free if you don’t get one.

TaxGrrrl, IRS Processing Returns, Refunds Faster Than In 2013.

Roberton Williams notes An Updated Marriage Bonus and Penalty Calculator at TaxVox.

 

 

William McBride, Empirical Evidence on Taxes and Growth: A Response to CBPP (Tax Policy Blog).  The Center for Budget and Policy Priorities has never met a tax increase it doesn’t like, as if there never is a point that giving the mule more to carry slows it down. The McBride post mentions an often-overlooked aspect of our government spending:

The thing is in reality the federal government spends only a small fraction of its budget on public investments, such as roads and airports, and instead spends most of the budget on transfer payments, such as social security and healthcare. Transfer payments are unproductive and even harmful to economic growth, according to most studies. So in practice, income taxes mainly go to transfer payments, and this deal is a clear economic loser, according to the IMF and most academic economists. 

Some folks, like Jim Maule, act like any complaint about the level of government spending and taxes means you are against roads, courts and public order — when most of what the government does is takes money from some people and gives it to other people.

 

Jack Townsend, U.S. Authorities Focus on Swiss Insurance Products Used to Hide U.S. Taxpayer Assets and Income

TaxProf, The IRS Scandal, Day 291

The Critical Question.  Sylvia Dion CPA Asks – Where Are The Women? (Peter Reilly)

Going Concern, The Ten Stages of Busy Season.  “You begin to hate every single human being in your office”

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Tax Roundup, 1/24/14: Executive stock spiff proposed for Iowa. And: Haiku!

Friday, January 24th, 2014 by Joe Kristan

20130117-1Legislators propose to exempt employer stock gains from employee Iowa income tax.   S.F. 2043 would exclude from taxation capital gains from stock received by an “employee-owner” of a company “on account of employment” with the corporation, and acquired while the taxpayer was still employed..  While it isn’t entirely clear from the legislation, it would appear to include long or short-term gains, and would include stock acquired by exercise of options or stock bonus plans.  It’s not clear that it would apply to gains on ESOP shares, which are generally issued to owners or redeemed on retirement, but I suspect it would.

It’s an astonishingly broad exclusion.  Once elected, it would apply to stock gifted by the employee-owner to spouses and lineal descendants.  It wouldn’t apply to many family owned companies, because it requires five shareholders, at least two unrelated under IRC Section 318 attribution.  Interestingly, the bill misstates Sec. 318, saying:

Two persons are considered related when, under section 318 of the Internal Revenue Code, one is a person who owns, directly or indirectly, capital stock that if directly owned would be attributed to the other person, or is the brother, sister, aunt, uncle, cousin, niece, or nephew of the other person who owns capital stock either directly or indirectly.

No, that would be Section 267 attribution, and only for pass-throughs.  Section 318 only makes a taxpayer related to:

his spouse (other than a spouse who is legally separated from the individual under a decree of divorce or separate maintenance), and

(ii) his children, grandchildren, and parents. 

No siblings, nieces or nephews to be seen.  If they can’t even read the Code, should they really be messing with the state income tax?

If the Iowa income tax is so awful that we need to carve out a special exemption to executive stockholders to get them to come to Iowa, we should fix it for everyone, not just for them.  Does anybody really doubt that Iowa would be more attractive to business with no corporate income tax and a 4% top individual income tax rate than with the current system plus a new executive spiff?  Come on, legislators:  take the Tax Update’s Quick and Dirty Iowa Tax Reform Plan off the shelf!

Related: Iowa House advances one-time stock gain bill, on a similar bill introduced last year.

 

David Henderson, Steve Moore’s Alternative Maximum Tax (Econlog).  Governor Branstad floated a plan to allow taxpayers to choose between Iowa’s current baroque income tax and a simpler one with lower rates, before abandoning it prior to the opening of the legislative session.   I thought I was being clever by calling an alternative maximum tax.  David reports that Steve Moore came up with both the idea and the name for a proposal he made for the federal tax system in the 1990s.

I still don’t care for it.  In practice we would be computing the tax both ways and paying the lesser amount.  By adding another computation to the process, it would actually make things harder.  The only way it would work would be if it resulted in lower taxes for everyone; then in a few years they could repeal the regular income tax without anyone noticing.

 

20120531-1The 200th edition of the Cavalcade of Risk is up!  This milestone edition of the long-lived roundup of insurance and risk management posts is at Rootfin.  Congratulations to Hank Stern, the evil genius behind the Cavalcade; he participates in this edition with Hacktastic!, on the security troubles of Healthcare.gov, and government’s efforts to hush them up:

See, the problem isn’t the wide-open portal, it’s the folks trying to alert the folks who run it that there is, in fact, a problem. I’m reminded of a certain Middle East river.

More alarming still, though, is that that it’s not just the state folks yelling “burn the witch:” now the FBI has warned Mr Hermansen to zip his lips. That’ll sure make the problem go away.

Your healthcare is in the very best of hands.

 

Jim Maule, How Not to Compute a Casualty Loss Deduction:

The taxpayer claimed a $12,020 casualty loss deduction on account of the loss of the vehicle. The taxpayer computed the deduction by subtracting the $48,000 from $60,020, the original value of the vehicle. However, the first step in computing the amount of a casualty loss deduction is to subtract the insurance recovery from the difference between the value of the property immediately before the casualty and the value of the property immediately after the casualty, unless the taxpayer chooses to use cost of repairs as a substitute measure, though that was not relevant in this case.  Because the taxpayer did not provide evidence of those values, and because the Tax Court was unwilling to assume that the vehicle’s value immediately before the accident was the same as its value when it was new, it upheld the determination of the IRS that the taxpayer was not entitled to a casualty loss deduction.

The IRS often examines casualty loss deductions, so you need to do your legwork on getting the valuations documented before you file.

 

Jason Dinesen, Small Businesses — Review Those Benefit Programs  “When was the last time your small business reviewed the benefit programs your business offers?”

William Perez weighs in on Finding the Right Tax Professional.

Kay Bell, Tax season is tax scam, tax identity theft season. “If you get any unexpected communication in any form that is purportedly from the IRS, especially at the start of tax season, be wary.”  And they will never initiate contact by phone or email.

Paul Neiffer, Cash Does Not Equal Gain.  You can’t make taxable gain go away by using it to pay off loans.

Trish McIntire, Kansas Taxes – Sneaky Changes.

Robert D. Flach brings the Friday Buzz!

 

Kyle Pomerleau, High-Income Taxpayers Could Face a Top Marginal Tax Rate over 50 percent this Tax Season.  Be glad we don’t take it all, serf!  He computes Iowa’s top combined rate at 47.4%.

 

taxanalystslogoChristopher Bergin, Fortress Secrecy – No News Here (Tax Analysts Blog).

Anyone familiar with my writing knows that I have bent over backwards to give the IRS the benefit of the doubt in this black eye some call the “exemption scandal.” I must admit I’m getting a little tired of bending.

Back in the day, as the saying goes, I often referred to the IRS as Fortress Secrecy, a term meant to describe the agency’s obsession with hiding as much of its operations as it can get away with. I am not a casual observer, and I have never seen things this bad. Everything the IRS has done in addressing the exemption scandal leads to just one conclusion: that this agency now believes it is accountable to no one other than itself.

Because shut up, peasant.

 

TaxProf, The IRS Scandal, Day 260

Howard Gleckman, Fiscal Magic: Paying for New Highways by Cutting Corporate Taxes (TaxVox)

 

Frank Agostino, Jairo G. Cano, and Crystal Loyer.  Guest posters at Procedurally Taxing, including the prolific Tax Court litigator Frank Agostino, discuss how IRS rules against giving false testimony bolstered an IRS man’s own case, in Section 1203 to Bolster a Taxpayer’s Credibility at Trial.

Jack Townsend, Required Records IRS Summons Enforced Again

 

News from the Profession.  Pulling Back the Curtain on Making Partner in a Big 4 Firm. Just sell, baby!

TaxGrrrl has Fun With Taxes: Tax Haiku 2014.

I’ll try it.

Here comes tax season

April 15 arrives swiftly

I need a stiff drink.

OK, I’ll keep the day job.

 

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Tax Roundup, 12/27/2013: Should you prepay your taxes for the deduction?

Friday, December 27th, 2013 by Joe Kristan

20111040logoIs it worth paying taxes early to get a deduction early?   Many more taxpayers will have to ask that question this year for the unfortunate reason that the increase in the top regular rate to 39.6% makes their regular tax higher than the alternative minimum tax.  While it’s cold consolation, you can use your deduction for state tax payments when you aren’t subject to AMT.

First you have to make sure you can use the deduction at all.  You can’t use a deduction for taxes paid on your federal return if you don’t itemize, or if you are subject to AMT.  If you pass these tests, then you should ponder if you are going to be in a much higher bracket next year.  Assuming that you are in the same bracket for both years, and that no change in the tax law will affect your deduction, it’s a time-value-of-money question.

The charts below show the tax benefit of prepaying $1,000 of state and local taxes at the federal tax brackets. The first bracket shown is the top Iowa rate, to enable Iowans to determine the value of prepaying federal taxes.  It shows the present value at several key payment dates:

 

January 15: Federal fourth quarter 2013 payments are due

January 31: due date of Iowa fourth quarter estimated taxes.

March 1: due date of first Iowa property tax installment.

April 15: due date of most state individual tax returns.

April 30: due date of Iowa individual tax returns.

September 1: due date of second Iowa property tax installment.

pv tax prepayment3

If the benefit is in green, prepayment makes sense.  If it is red, the time value lost by paying early exceeds the benefit of accelerating the deduction by a year, assuming that the benefit will arrive on April 15.

This chart is only accurate assuming all of its underlying assumptions are met, so use it with caution.   It does illustrate that prepaying January taxes usually makes sense, but prepaying September taxes seldom does.

Come back tomorrow for another installment of our 2013 year-end tax tips series!

 

Howard Gleckman, Finance Chairman In-Waiting Ron Wyden Is A Tax Reformer (TaxVox):

The 64-year-old Wyden, who has a history of proposing creative, ambitious, and sometimes controversial ideas, initially sponsored a tax code overhaul in 2010 with former GOP senator Judd Gregg of New Hampshire. After Gregg retired, Wyden found another GOP cosponsor in Dan Coates of Indiana. Wyden-Coates follows the broad outline of the original Wyden-Gregg plan.

For individuals, it would set three rates—15-25-35. The top bracket would kick in at $140,000 for couples filing jointly. It would repeal the Alternative Minimum Tax, nearly triple the standard deduction, and create a 35 percent exclusion for long-term capital gains and dividends (equal to a rate of 22.75 percent for top-bracket taxpayers). It would eliminate the tax advantages of many employee benefits–but not employer-sponsored health insurance–and simplify tax-preferred savings.

While the plan would preserve most other individual tax preferences, the very large standard deduction would sharply limit the number of taxpayers who take them (even today, fewer than one-third itemize).

Wyden-Coates would cut the corporate rate to 24 percent from 35 percent.

I can think of a better tax reform, but Wyden-Coates would be a huge improvement over what we have.

 

taxanalystslogoCara Griffith, Enabling an Informed Debate (Tax Analysts Blog):

A transparent tax system, in which there are no “secret tax laws,” is a better tax system in that taxpayers more clearly understand the laws they are required to comply with, tax officials can more easily administer the law, and both sides can engage in a more informed debate about tax policy.

I would add that the transparency should extend to subsidies, like Economic development tax credits, that are run through state tax returns.

 

Jason Dinesen, Capital Losses and Tax Planning 

Kay Bell,  Valuing your tax-deductible donations of household goods

Jim Maule, How to Lose a Charitable Contribution Deduction.  If you leave an anonymous gold coin or jewelry piece in a Salvation Army kettle, it does no good on your 1040.

TaxGrrrl, 12 Days Of Charitable Giving: Ride For Reading   “Our featured charity, Ride for Reading, delivers books to children in underserved communities… by bicycle!”

 

 

TaxProf, Court: Home Depot Cannot Use Out-of-State IP Affiliate to Shift Income From Arizona,  Don’t expect state courts to uphold tricks that reduce state revenue.

Arnold Kling describes Two Views of Obamacare, and explains how it is far from a “market approach.”

 

20120514-1The flip side of the “Facebook stock option loophole”: Mark Zuckerberg’s $2 Billion Tax Bill (TaxProf).  People who complain about the deduction for stock option compensation never mention that the same amount is income to the option holders, usually at higher rates.

 

 

Memory Lane beckons at Robert D. Flach’s place with 2013: THE YEAR IN TAXES – PART ONE:

Perhaps tied for the top tax story of the year (with the death of DOMA, which I will discuss later) is the David-versus-Goliath victory of three independent tax return preparers who felt the cost of the IRS mandatory RTRP tax preparer regulation regime, especially the annual CPE requirement, was “prohibitive” for their small practices and joined with the Institute for Justice to challenge the licensing program in federal court in Loving v IRS.

Go, David!

 

The Critical Question: Did Tenth Circuit Help KPMG Weasel Out Of Liability To Buy.com Founder?  (Peter Reilly)

 

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Tax Roundup, 12/23/2013: The joys of being at-risk. And: commence self-destruction sequence!

Monday, December 23rd, 2013 by Joe Kristan

S imageS image20091210-1.JPG‘Tis the season to be at-risk.  We mentioned yesterday how you can get basis for deducting S corporation losses by making a loan to the corporation.  But not just any loan.  If you borrow from another S corporation shareholder to make your loan, your basis won’t be “at-risk.”

A Monroe, Iowa farmer learned that the hard way with his 1991 loan, as we discussed long, long ago:

Larry Van Wyk, a farmer from Monroe, Iowa, got a taste of the dangers of the at-risk related-party loan rules back when farmers were their primary target. He owned an S corporation farm 50-50 with his brother-in-law, Keith Roorda. On December 24, 1991, Larry borrowed $700,000 from Keith. The loan was fully-recourse, so the brother-in-law could proceed ruthlessly against Larry in the event of non-payment. Larry used about $250,000 to repay money he owned the S corporation and loaned the remainder to increase his basis to enable him to deduct losses.

 Unfortunately, Larry’s brother-in-law had “an interest in the activity” – he owned half of it. This made the deduction not “at-risk,” even though no loan from a brother-in-law is without risk in a very real sense. The efforts of some of the finest tax attorneys west of the Mississippi were unavailing; the Tax Court agreed with the IRS, and Larry lost his losses.

It’s not enough to avoid borrowing from another shareholder; you don’t want to borrow from somebody related to another shareholder.  And as “interest in the activity” isn’t necessarily the same as “shareholder,” you should watch out for borrowing from anybody else involved in the business.  The safe thing is to visit your friendly community banker for your loan.

This is another of our daily year-end 2013 tax tips — one a day through December 31!

 

Weekend update!  In case you missed it over the weekend:

2013 Winter Solstice Tax Tip: S corporation basis and

Winter Sunday tax tip: loans for S corporation basis.

 

William Perez, Roth Conversions as a Year-End Tax Strategy

Jason Dinesen,  Six Things I’m Talking to My Small Business Clients About at Year-End (Part 2) 

 

This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

We have a Commissioner.  Senate Votes 59-36 to Confirm John Koskinen as IRS Commissioner (TaxProf).  A lot of folks have noted that once again we have a Commissioner who hasn’t done taxes for a living.  That doesn’t have to be fatal.  Anybody who has hung around CPA firms can tell you that somebody who is good at taxes can be pretty terrible at running an organization.

Still, it’s not a great sign.  The new guy, John Koskinen, will be 79 years-old when his five-year term runs out.  He got his reputation as a “turnaround guy” at Freddie Mac in the wake of the financial crisis, preserving the bureaucracy as responsible as any for the financial meltdown.  I suspect he was hired to protect the agency, not the taxpayer.

By the way, there is another Koskinen.

 

The crumbling mandate.  Tax Analysts reports ($link):

Individuals whose health insurance plans were canceled by insurers because they did not meet the requirements of the Affordable Care Act will be eligible for an exemption from the individual mandate penalty that takes effect in 2014, the Department of Health and Human Services said late December 19.

20121120-2Megan McArdle says this means Obamacare Initiates Self-Destruction Sequence:

As Ezra Klein points out, this seriously undermines the political viability of the individual mandate: “But this puts the administration on some very difficult-to-defend ground. Normally, the individual mandate applies to anyone who can purchase qualifying insurance for less than 8 percent of their income. Either that threshold is right or it’s wrong. But it’s hard to argue that it’s right for the currently uninsured but wrong for people whose plans were canceled … Put more simply, Republicans will immediately begin calling for the uninsured to get this same exemption. What will the Obama administration say in response? Why are people whose plans were canceled more deserving of help than people who couldn’t afford a plan in the first place?”

Arnold Kling put it more pithily: “Obama Repeals Obamacare.”

They’re desperately improvising as they go.  Not a good situation, considering the mandate tax is supposed to take effect in less than two weeks.   I’m starting to doubt that it ever gets enforced.

Related: Paul Neiffer, Cancelled Health Insurance Policies

 

20121220-3Kay Bell, Singing the praises of tax-favored retirement savings

Brian Mahany, IRS Ordered To Pay Taxpayer’s Legal Fees 

Russ Fox, The Death of the Death Master File (Sort of)

Peter Reilly,  Woody Allen’s Blue Jasmine Has A Tax Lesson.  If you don’t wan’t to stay married to a spouse, you might not want to file a joint return either.

TaxGrrrl,  12 Days Of Charitable Giving 2013: Esophageal Cancer Action Network

Robert D. Flach has a special Monday Buzz!

 

Tax Justice BlogUltra-Wealthy Dodge Billions in Taxes Using “GRAT” Loophole

Michael Schuyler, Why A Death Tax “Loophole” May Make Economic Sense (Tax Policy Blog).

Jack Townsend, Swiss Bank Hype and Over-Hype.  ” Merely having U.S. clients with undeclared accounts is not the problem for those banks; it is those banks actions to become complicit in the U.S. clients’ failure to report the accounts.”

Jim Maule finds his inner libertarian, embracing a Reason Foundation report calling for elimination of the home mortgage deduction in exchange for lower rates.

 

News from the Professon.  PwC Won’t Stop Beliebin’ In Ugly Christmas Sweaters (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, 10/11/13: Why filing on time matters. And: nope, still closed.

Friday, October 11th, 2013 by Joe Kristan

20130311-1It’s the last weekend of 1040 season!  Some folks think that happened six months ago, but many of us know that extension season is when you are up against it.  Extended 1040s are due on Tuesday, and anything filed after that is late.  Only people out of the country on a long-term basis might have any more time.

So what’s at stake?  Is it really such a big deal to file your 1040 late?  Especially if you have a refund?

Yes.

First, let’s take a look at the penalties for late filing: five percent of any tax owed, up to 25% of the balance due, and interest on the unpaid balances.

But there are other drawbacks.  You never start the statute of limitations if you don’t file.  That means the IRS has pretty much forever to look at the year you haven’t filed for.

It doesn’t work that way if you have refunds coming.  From IRS Publication 17:

Time for filing a claim for refund. Generally, you must file your claim for a credit or refund within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. Returns filed before the due date (without regard to extensions) are considered filed on the due date (even if the due date was a Saturday, Sunday, or legal holiday). These time periods are suspended while you are financially disabled, discussed later.

If the last day for claiming a credit or refund is a Saturday, Sunday, or legal holiday, you can file the claim on the next business day.

If you do not file a claim within this period, you may not be entitled to a credit or a refund.

So if you don’t file, its two years and out for getting that withholding back.  Each year stands on its own.  If you didn’t file for, say, 2007-2009, and you only owed tax in 2009, you still owe it, but you get no benefit for the 2008 and 2007 refunds you didn’t claim.

So file on time.  If you are missing information, file with what you have and amend later if necessary.  Don’t let the perfect be the enemy of the good.  Not filing can quickly become a habit, and it’s often a very expensive one.

Related: Penalties on Late 2012 Tax Payments (William Perez)

 

William McBride,  The Long Goodbye to U.S. Corporations (tax Policy Blog):

If not moving abroad, many U.S. businesses have been moving to the individual tax code, where they are taxed once on profits that are passed-through to owners, rather than twice through the corporate tax and shareholder taxes. The end result is there are now fewer corporations than at any time since the 1970s. The chart below shows standard C corporations peaked in 1986 at 2.6 million, and declined to 1.8 million as of 2008, according to the IRS. Preliminary IRS data indicates the number of C corporations dropped further to 1.6 million as of 2010. The trend shows no sign of slowing down.

20131011-1

 

This has two important implications for tax policy:

1.  Increasing the individual rate means increasing the tax load on business, as more taxes are run through 1040s.

2. While corporate tax reform is important, it misses a lot.

 

Wikipedia image courtesy Tallent Show under Creative Commons license

Wikipedia image courtesy Tallent Show under Creative Commons license

Christopher Bergin, The IRS Is Shut Down – And We Will All Pay (Tax Analysts Blog)

Tax Justice Blog, Paul Ryan’s Latest Idea: Enact the Spending Cuts Proposed by Obama, Ignore His Revenue Proposals.  I’m good with that.

Janet Novack,  As IRS Shutdown Drags On, Some Taxpayers Face Big Problems:

The IRS has said that once the shutdown was “fully complete” it stopped its computers from automatically generating new liens and levies on taxpayers’ property and that it is now seizing taxpayers’ property in only rare cases. But that’s no help to the taxpayers who had their funds frozen immediately before the shutdown or who were hit by notices that had already been printed and were mailed after the shutdown. 

The government needs to use its money to chase people out of public parks, rather than to free your frozen funds.

 

OK, now I’m feeling the crisis.   No new specialty beers during government shutdown (Kay Bell)

 

Peter Reilly,  Are CVS Stores Actually Good 1031 Targets ?   

Detroit is back! Judge Hands Down Very Nearly The Longest Sentence Ever To Public Official For Corruption And Tax Fraud   (TaxGrrrl)

TaxProf, The IRS Scandal, Day 155.  This edition features reports that the IRS exchanged confidential taxpayer information with the White House.  Anybody who doesn’t think this is a real scandal should share somebody’s confidential tax information sometime with your favorite Republican official and see what happens.

Jack Townsend, Article on DOJ’s Swiss Bank Initiative.

Leslie Book, Supreme Court: Woods Oral Argument This Week.  “As many tax procedure buffs know, the case presents an opportunity for the Court to decide whether the 40% gross valuation misstatement penalty applies in a variety of tax shelter transactions when partnerships have sought to concede the underlying liability on grounds that do not directly relate to valuation misstatements, such as the at-risk rules or the economic substance doctrine.”

Jim Maule,  Tax Review Board Strips City’s Lap Dance Tax Attempt.

Robert D. Flach brings your Friday Buzz!

 

The Critical Question:  Should We Eliminate the Extraordinary Measures(Donald Marron):

You’ve probably heard that Treasury will hit the debt limit on October 17 and soon thereafter it won’t be able to pay all of America’s bills. That second part is true: Congress needs to act soon—preferably before the 17th—so Treasury doesn’t miss any payments. But the first part isn’t: Treasury actually hit the debt limit way back on May 19.

So how did Treasury keep paying our bills? Extraordinary measures.

Interesting.  It’s fiscal sleight of hand of the sort that would get you or me jailed.

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Tax Roundup, 10/1/2013: Shutdown edition. And two weeks left for 2012 1040s!

Tuesday, October 1st, 2013 by Joe Kristan

Extended 1040s are due two weeks from today! Sorry for not posting yesterday, but I’m sure many of you understand.  I was laying in canned goods and ammo for the government shutdown.

Wikipedia image courtesy Tallent Show under Creative Commons license

Wikipedia image courtesy Tallent Show under Creative Commons license

The TaxProf has the IRS Shutdown Plan.  You can still file, but the examiners get a day off.

I like Don Boudreaux’s take:

 If I walk into a supermarket to buy a few artichokes and discover that the supermarket has no artichokes for sale that day, I don’t pay the supermarket for the artichokes that I don’t get.  So shouldn’t we taxpayers be relieved of the obligation to pay for the national-government services that we are not now receiving?

It implies the big difference between things we get from businesses and things we get from the government:  if we don’t like what they have at one store, we can go to another, but if we don’t like the service from Uncle Sam’s Essentials, we can’t exactly take our business elsewhere.

 

Andrew Lundeen and Kyle Pomerleau explain What Happens When There Is a Government Shutdown (Tax Policy Blog):

From 1976 to present there have been 17 shutdowns and like this shutdown, many were caused by political disagreement. For instance, the government shutdown for 12 days in 1977 over a political fight between the House and the Senate over Medicaid policy.

The average length of past government shutdowns is 6.4 days, but this is no indication of how long this shutdown will last. During the Reagan administration there were several shutdowns that only lasted one day.

So either it’s not the end of the world, or the world ends a lot.

Glass half-full: Shutdown Will Stop IRS Audits, but Not ACA Implementation (Jeremy Scott, Tax Analysts Blog)

TaxGrrrl, With Shutdown, Taxes Still Due But You Can’t Ask IRS For Help   

Janet Novack,  Federal Government Begins First Shutdown In 17 Years 

Kay Bell, IRS lays out plan to deal with federal government shutdown

 

William Perez,  IRA Recharacterizations Due by October 15th:

“Recharacterizing” means, quite simply, we can change the character of the IRA: if the contribution was made to a traditional IRA, we can re-characterize it to a Roth IRA; and if the contribution was made to a Roth IRA, it can be recharacterized to a traditional IRA.

 

tax fairyTrish McIntire, It’s Here…

The Health Insurance Marketplace (HIM) opened today! The Affordable Care Act (ACA) mandates that almost everyone must have health insurance by January 1, 2014. The HIM is a way for anyone not covered by an employer’s affordable plan to shop for health insurance. Let’s face it the ACA is complicated and the HIM part is no exception. This post will cover the highlights of the Marketplaces to give you an overview of what will happen.

The Health Care Fairy is  the Tax Fairy’s sister.  Believers in either one end up disappointed.

 

Missouri Tax Guy, How To Write Off Travel Expenses As Business Expenses.  “You can’t go on a one-day business trip and stretch it into a week of sightseeing, and then deduct anything as business-related.”

Point, counterpoint:

4 Reasons the Medical Device Tax is Bad Policy (Kyle Pomerleau, Tax Policy Blog)

The Medical Device Tax Should Not Be Repealed (Tax Justice Blog):

One argument made by the industry against the medical device excise tax is that it singles them out for higher taxes. The reality, however, is that the excise tax was passed as one of many levies on various healthcare sectors to help pay for health insurance expansion. 

That apparently would include the 10% excise tax on tanning booths that is part of Obamacare financing.  They say the tax is paid by something called “various healthcare sectors.”  That’s a fancy way to say “patients.”

 

Jack Townsend, Zwerner Rises to Defense Against Multiple FBAR Penalties:

Readers will recall that, in an unexpected development, Treasury assessed and DOJ Tax sued to collect the 50% FBAR penalty against Carl Zwerner for four years.  Up to that point, based on the information publicly available (principally from offshore account plea convictions), Treasury had only assessed a single FBAR of 50% for the highest year.  Thus, it was of considerable interest — and angst — to taxpayers and practitioners that Treasury would assert 4 years of FBAR penalties.

That could get expensive.

Brian Mahany,  FBAR, FATCA Are Not Dirty Words!  They can certainly trigger some, though.

 

Consolation prizes: Attorney Found Guilty of 28 Tax Charges, but Does Get Nomination for Tax Offender of the Year (Russ Fox)

Peter Reilly,  Has Kent Hovind Given Up Fight Against IRS ?   Mr. Hovind is famous for opening a theme park based on the idea that humans and dinosaurs co-existed.  I suppose if you hang around politicians, you could conclude that.

Robert D. Flach is Buzzing the government shutdown.

 

Nothing is stopping you from writing a check right now, says a cynical tax blogger.   “Tax Us More!” Say Some Wealthy Pennsylvanians (Jim Maule) Because they can pay more taxes any time they want, they really mean “tax other people more.”

 

Career Corner: Ex-PwC Employee Discovers Just How Limiting a Career-Limiting Move Supporting Terrorism Can Be.  (Going Concern)  I worked there when I was a very green new accountant, and I was frequently terrified.

 

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

Tuesday, September 24th, 2013 by Joe Kristan

 

Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

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

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

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

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

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

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

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

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

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

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

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

 

 

20130717-1

Rashia Wilson in happier days.

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

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

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

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

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

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

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

Just like James Bond, then.

 

Jana Luttenegger,  Deducting Clothing as a Business Expense:

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

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

 

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

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

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

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

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

 

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

TaxProf,  The IRS Scandal, Day 138

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

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

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

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

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

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

 

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

 

Quotable:

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

Arnold Kling.

 

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

 

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

Monday, July 29th, 2013 by Joe Kristan

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

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

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

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

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

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

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

 

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

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

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

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

 

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

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

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

 

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

 

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

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

Instapundit:

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

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

 

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

William Perez, IRS Update for July 26, 2013

 

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

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

 

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

Peter Reilly, Why Tax Reform Is Impossible

 

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

Linda Beale, Proposals for Cutting the IRS Budget.

 

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

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Tax Roundup, 7/26/2013: Shank and hook edition.

Friday, July 26th, 2013 by Joe Kristan

IMG_1944Today is the always-to-be-dreaded office golf day.  My suggestion for an all-office chess tournament in its place went nowhere.  I tee off with the first group, so this will be a quick roundup.  At least it will be over early.

 

Tax Analysts has this item today ($link):

President Obama on July 25 signed a law renaming code section 219(c) as the Kay Bailey Hutchison Spousal IRA, the White House said in a statement.

It’s obnoxious how politicians think they’re so awesome that they should be naming things after one another.  But if we are going to start naming popular tax provisions after politicians, why stop there?  Maybe all tax laws should be named after the schmucks responsible for them.  I have some ideas:

  • The Barack Obama individual tax for not buying health insurance you don’t want.
  • The Chuck Grassley Sec. 409A excise tax on deferred compensation foot-faults.
  • The Nancy Pelosi PCORI fee
  • The Max Baucus Net Investment Income Tax.

This could be fun.  Feel free to name your own in the comments.

 

TaxProf, The IRS Scandal,Day 78

Kay Bell, Same-sex marriage widows and widowers to get estate tax refunds from New York

TaxGrrrl, Dolce & Gabbana Say Tax Woes May Force Them To Close

Jim Maule, The Tax Cost of Contract Procrastination

Me, IRS issues Applicable Federal Rates (AFR) for August 2013

Tax Justice Blog, Nike’s Tax Haven Subsidiaries Are Named After Its Shoe Brands

Robert D. Flach has your Friday Buzz!

 

Christopher Bergin, Baucus and Camp: Tax Reformers or Dedicated Dreamers? (Tax Analysts Blog)

Peter Reilly, Why Tax Reform Is Impossible

News from the profession.  Ernst & Young Trusts That Everyone Knows Those ‘Sexy Boys’ Aren’t Building a Better Working World  (Going Concern)

 

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Tax Roundup, 7/22/2013: More fertilizer! And how to finance your party, the tax grifter way.

Monday, July 22nd, 2013 by Joe Kristan
Via Wikipedia

Via Wikipedia

More taxpayer fertilizer.  Iowa board OKs additional $25M in tax credits for Orascom.  (Quad Cities Times):

The unanimous vote by the board on Friday makes a total of $82.5 million in state tax credit benefits available to Orascom Construction, parent of the Iowa Fertilizer Company.

The $1.8 billion plant is expected to employ as many as 165 workers when completed.

In case you’re wondering, that’s about $500,000 per “permanent job.”  That assumes that the money is actually buying jobs, but the plant almost certainly was going to be built in Iowa without the subsidies.  The $82.5 million only buys politicians press conferences, ribbon cuttings and silver souvenir shovels, with our money.

 

TaxProf, Faber:  ‘Ivory Tower’ Economists Are Wrong: Taxes Play Major Role in Wealthy Fleeing High-Tax States:

Amy Hanauer and Tim Krueger argue that taxes play no role in taxpayer decisions to move from one state to another (The Tax Flight Myth: People Move for Jobs and Family, Not Taxes,  State Tax Notes, July 8, 2013, p. 97 … ). Their conclusions are apparently based on empirical studies and computer models. They are wrong. Based on my experience as a practitioner who works with wealthy individuals and corporations every day, I can assure you that taxes often play a major role in these decisions and that in many cases, they are the sole reason for the move.

That’s right, in my experience.  Taxpayers absolutely take taxes into account when they move, even if it’s hard to isolate in aggregate data.  Tax aren’t everything, but they are definitely something.

Kim Reuben, Detroit’s bankruptcy: What does it mean for other cities? (TaxVox)

Russ Fox, The Flow of AGI from One State to Another

 

Jason Dinesen, Tax Aspects of Renting Your Home for a Day or Two.  Taking in RAGRAI riders can give you some tax-free income.

Robert D. Flach, KEEPING A CONTEMPORANEOUS MILEAGE LOG.  If you want to deduct your mileage, you need to keep your log up to date.

 

Tyler Cowen, Wealth Taxes: A Future Battleground.  Just another way for politicians to cover their profligacy.  Via Arnold Kling, who has more.

TaxGrrrl, Rather Than Tackle Tough Tax Reform, Congress Focuses On The Death Tax. Again.

Kay Bell, The U.S. tax system is not very attractive

William McBride, American Corporations Losing Ground (Tax Policy Blog):

The U.S. corporate tax is the most punitive in the developed world, not just because the statutory corporate tax rate is the highest but also because the effective corporate tax rate is the highest or nearly the highest according to recent studies

TaxProf, The IRS Scandal, Day 74.

 

Tax offender of the year nominee.  I no longer choose a Taxpayer of the Year, but Russ Fox still “honors” a “tax offender of the year.”  I hope he will consider Ayawna Webster, former president of the D.C. Young Democrats and staff aide to a D.C. City Council Member, Harry Thomoas Jr.  The Washington Post reports:

The former chief of staff to one-time D.C. council member Harry Thomas Jr. pleaded guilty Friday to falsifying tax documents in connection with payments for a 2009 political ball…

 According to court documents, [non-profit chief Millicent] West worked with Thomas and Webster to send trust money intended to pay for youth programs to help cover the cost of the party.

Just when you think politicians can’t come up with ways to make you think less of them, they come through.  Looting a fund for poor kids to pay for a “political ball” is notably evil.

 

Brian Mahany, Business Owner Pleads to Hiding Offshore Account

Jack Townsend, Liechtenstein Bank In U.S. Cross-Hairs

 

A video report on Rashia Wilson’s sentencing

She had a sixth-grade education and stole millions from the taxpayers.  When that can happen — over and 0ver — there just may be a problem with IRS controls over refunds.

 

The Critical Question.  Lap Dance Tax?  (Jim Maule)

News you can use.  The Data on Bar Fights (Freakonomics Blog)

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Tax Roundup, July 15, 2013: The IRS isn’t a payday-lending company.

Monday, July 15th, 2013 by Joe Kristan

Federal_Bureau_of_Prisons_Seal.svgDon’t think of it as borrowing money from the government.  They don’t look at it that way.  An Iowan has pleaded guilty to criminal charges for failing to remit payroll taxes withheld from employees.  The AP reports that Eric Holub, a Cedar Rapids man, admitted to not remitting withheld taxes from employees of his private security firm.

He may face prison time. It can be tempting to not remit payroll taxes when your vendors want to be paid.  Sometimes employers rationalize it as “borrowing” that will be repaid someday, somehow.  As this case shows, it can be a very expensive “loan.”

Link: Copy of Indictment.

 

Kay Bell,  Monday, July 15, is filing deadline for Boston area taxpayers

 

Penalty declined.  No jail time for Zorich (Chicago Sun Times, via Going Concern).  The former Chicago Bear and Fighting Irishman gets fines, probation for failure to file.

Russ Fox,  Microsafted to ClubFed.  No, that’s not a typo:

Matthew Taylor is heading to ClubFed for a 7 1/2 year of  vacation from
his previous job as an art thief and tax evader.  It’s what he did to
try to hide his crime that makes this case interesting…

What did he do to hide his income?  He used false social security numbers to hide money in bank accounts, he used multiple post office boxes to open other post office boxes, and he sent money to an offshore account.  Those are typical strategies.

It’s a couple of other things he did that grabbed my attention.  He set up phony companies with names similar to other companies (Microsaft, anyone?).  He blamed his mother for all his bank accounts and tax troubles…even though she was in failing health.

Well, at least he won’t have to talk to Mom at awkward family dinners for awhile.

 

Jason Dinesen,  Have an HRA? Make Sure to Pay Your “Patient-Centered Outcomes Trust Fund Fee” .  A tax where the compliance cost will usually exceed the revenue for the government.

TaxTrials, Government Denied Summary Judgment in Conservation Easement Case

 

Brian Mahany, Offshore Account Post: Trust Me, I Am From The IRS

Jack Townsend,  DOJ Requests Tougher Sentencing for Tax Crimes Involving Offshore Accounts.  Shoot to kill the jaywakers.

 

Missouri Tax Guy,  Really, you don’t’ know what an Enrolled Agent (EA) is?  Sadly, the EA designation is widely unknown and undervalued, as Bruce’s post makes clear.

 

TaxGrrrl, Congress Threatens IRS With ‘Right-Sized’ Budget Cuts

The budget, which Chairman Hal Rogers (R-KY) has referred to as “right-sized” (downloads as a pdf), gives the IRS $9 billion for 2014. In a classic case of the pot calling the kettle black, the budget is clearly a tweak at the IRS, which has been the target recently of investigations into disreputable practices, defiant bonuses and questionable spending. Rogers says the spending limits will remain “until there are clear signs that they have fixed their broken bureaucracies, curtailed lavish
spending on employee conferences and awards, and returned to abiding by the will of Congress.”

TaxGrrrl is much more sympathetic to the IRS than I am, but she is right to criticize this typical fire-into-the-crowd approach.

 

Martin Sullivan, Virginia Gas Tax Cut: Drivers Short-Changed at the Pump? (Tax Analysts Blog)

Austin John, Update on the Maryland Rain Tax (Tax Policy Blog)

 

What could go wrong?  An Honor System for Federal Taxes? (Jim Maule).  In truth, the Obamacare individual mandate has some aspects of an honor system, given the inability of the IRS to use its usual collection tools to enforce it.

 

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Tax Roundup, 6/7/2013: Mexican land trust arrangements aren’t U.S. trusts. And don’t settle for just bad enough!

Friday, June 7th, 2013 by Joe Kristan
Flickr image by Christian under Creative Commons license.

Flickr image by Christian under Creative Commons license.

The IRS had good news for many Americans owning property in Mexico.  In Rev. Rul. 2013-14, the IRS ruled that a “fideicomiso” land trust enabling Americans to hold residential property in parts of Mexico is not a trust for U.S. tax purposes.  This means taxpayers who haven’t been reporting these as trusts on Form 3520 aren’t exposed to the $10,000 annual penalty that applies to taxpayers who fail to report their foreign trusts.

Andrew Mitchel: Fideicomisos/Mexican Land Trusts are Not Trusts (Finally)  “Now if the I.R.S. will only conclude the same for Canadian tax free savings accounts (“TFSAs”).”

 

Peter Reilly,  IRS Does Not Spend Enough On Conferences. “Actively trying to demoralize the IRS employees to score political points rubs salt into the wound.”

Don’t settle for just bad enough.  The IRS: It’s Bad Enough (Christopher Bergin, Tax Analysts Blog).

The IRS is seriously and dangerously broken. This is not only unfair to the many dedicated public servants at the IRS; it’s unfair to all of us. Get to the truth. Arbitrarily punishing the IRS isn’t going to help any more than blindly defending the agency. The IRS needs fixing and it needs it now, and that starts with new and strong leadership inside the agency, and a President who is willing to spend the political capital on  IRS reform. We don’t have that President. As for the Republicans, they’d rather turn the IRS into Monica Lewinsky.

Somehow I don’t think the IRS will ever be that cooperative.

Patrick Temple-West,  IRS staff say Washington officials helped direct the probe of tea-party groups (Tax Break)

TaxProf, The IRS Scandal, Day 29.

 

Terrible news for tax practitioners from Russ Fox:  IRS Reportedly Will Close eServices’ Disclosure Authorization Program.  This program saves weeks in solving mystery IRS notices.  Closing it throws sand in the gears of tax compliance.

 

20130607-2Howard Gleckman,  Let Legal Marijuana Dispensaries Deduct Their Business Expenses.  Even when states legalize it, punitive tax rules make it almost impossible to sell legal pot profitably.

 

Brian Maharry, Abusive Tax Shelter Results In $100 Million Assessment

Tax Trials,  Value Matters, Even as Tax Court Denies Conservation Easement Deduction

Fiduciary Income Tax Blog:  FBAR Due Date — 2013.  It’s June 30, kids.

 

In America, we only do this when the Tax Man asks us to.  Italian businessmen drop trou to protest tax collector (Kay Bell)

Child Abuse? Parents to Children: Be a Lawyer, Marry a Lawyer (Jim Maule)

 

TaxGrrrl, Federal Gas Tax Passes Another Milestone: What Is The Future?

We’re closing early to go to the parties.  Happy Birthday to the Federal Gasoline Tax (Philip Hammersley, Tax Policy Blog); Tax Justice Blog,  A Not So Happy 35th Birthday for Proposition 13 But first be sure to catch Robert D. Flach’s Friday Buzz 

 

We were happy to pay him, it was some of his best work.  Another British filmmaker faces jail time for scamming the U.K. film tax credit system in making a film that never made it to the screen, reports the Express:

The scam included a bogus invoice suggesting Kill Bill star Carradine was paid more than £400,000 for 13 days worth of work, even though he had died two weeks prior to the date stamped on the notice.

This is the second criminal film project to hit the news in the U.K.; another one hilariously involved a film thrown together when the operators sensed the authorities were catching on to their scam.  Meanwhile two filmmakers are serving out their 10-year sentences for scamming the Iowa film credit program.  You’d almost think maybe these film credits are just a scam entirely.

 

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Tax Roundup, 6/5/2013: IRS line-dancing edition. And stimulus that works!

Wednesday, June 5th, 2013 by Joe Kristan

The IRS spent $4.1 million on a single internal conference in Anaheim, reports the Treasury Inspector General for Tax Administration.  Sure, it’s easy to mock the IRS for conferences, or for silly dance videos, though I find it reassuring to see that there are people in the IRS who have a sense of humor.

What bothers me is the priorities it shows.  For tax pros in Iowa, the best thing the IRS does is its Practitioner Liaison program.  Not only does our liaison do an excellent job of alerting us to processing problems during filing season and cutting through red tape, but she puts on well-attended and popular conferences that have to help the IRS get better-prepared filings.

Yet the Practitioner Liaison office is continually nickled and dimed.  There is always pressure to limit travel to outlying towns.  Our liaison has had to fill in for other states when their positions have been left vacant.  It just seems wrong that the IRS can find $135,000 for speakers to inspire agents in Anaheim, but not to fill the gas tank of someone in the field in Iowa doing useful and popular work.

It also doesn’t help the argument that the IRS just can’t afford to answer its phones or process exempt organization applications.

David Henderson (Econlog) posts a summary of what $135,000 got for the Anaheim attendees.

Kay Bell, Taxpayers picked up $49 million IRS conference tab over three years, including one that cost $4.1 million alone

 

TaxProf, The IRS Scandal, Day 27

Patrick Temple-West,  IRS scandal prompts hope for tax reform, and more

 

TaxGrrrl has a wonderful story about the beneficiaries of a California jobs tax credit:

This practice made news in the state when a local news crew focused on two strip clubs,   Deja Vu Showgirls of Rancho Cordova and Gold Club Centerfolds, found to have received thousands of dollars in tax breaks – without doing anything different from before. Those clubs benefited from their existing locations and were not lured to the area by the promise of tax incentives; additionally, their hiring practices weren’t influenced at all by the tax breaks. That isn’t the point of the credit, according to Sen. Hill and his supporters.

No, the point of the tax credit is to enable politicians to take credit for “creating jobs” by taking your money and giving it to somebody else.

Longtime readers know that The Tax Update has no use for any “economic development” tax credits.  These credits are generally paying companies to do what they would have done anyway — in this case, to disrobe.   At least these credits went for something people want, and there’s no questioning the stimulative effect.

 

Paul Neiffer, Update on Commodity Gifts

Missouri Tax Guy, Employee vs. Contractor… How to tell.

 

Peter Reilly, California Gets To Snack On Jerome James SuperSonics Salary   If you keep a house in California, don’t be surprised if California thinks you live there.

David Brunori, On its 35th Birthday, Prop 13 Remains Flawed (Tax.com):

But I think Proposition 13 was a horrible policy choice.  It devastated local government autonomy. Local governments in the United States have been the most efficient, effective, and democratically responsive means of providing public services. But that effectiveness is contingent on having an independent source of revenue. When the state finances local
government services, it is almost assured that those services will not be provided at levels demanded by citizens.

Joseph Henchman,   Nevada Approves $20 million/year to Subsidize Film and TV Production.  (Tax Policy Blog) They apparently have enough strip clubs.

Tax Justice Blog,  Brownback’s Kansas is Taking Tax Cuts to Extremes

 

Jack Townsend,  Swiss Enablers Are Worried, As Well They Should Be

Jim Maule, Code-Size Ignorance Knows No Boundaries.  The tax law is enough of a mess without exaggeration.

Robert D. Flach rounds up reaction to his defense of doing returns by hand.

 

Not if you do it right.  IRS Bashing Can Be Fun But Also Expensive (Joseph Thorndike, Tax.com)

 

 

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

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

Lois Lerner, IRS, Class of 2013?

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

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

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

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

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

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

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

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

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

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

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

Salvi queried how then could such an agreement be enforced.

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

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

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

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

 

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

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

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

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

 

TaxProf, The IRS Scandal, Day 26.

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

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

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

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

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

 

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

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

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

 

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

 

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Tax Roundup, 5/31/2013: 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

20130531-1

 

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:

20130512-1

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

 

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