Posts Tagged ‘Missouri Tax Guy’

Tax Roundup, 5/21/14: Practitioner Pitchforks and Torches edition. And: math remains hard!

Wednesday, May 21st, 2014 by Joe Kristan

20140521-1The new identification rules for remote signatures aren’t going over well.   (See update below.)  At a CPE event yesterday former IRS Stakeholder Liaison Kristy Maitre outlined the new e-filing identity match requirement we are supposed to meet (now!  for extended 2013 returns!).  These include “third-party verification” of identities of our long-time clients if they don’t visit the office.  The ones that visit, we only need to see their papers.

The 250 or so practitioners present didn’t appreciate the joke at all.  They asked the obvious question: how do we even comply with this?  It’s not at all clear how we get “third-party verification.”  I can pretty much guarantee that nobody is complying with that requirement now, because few are aware of it, and the ones that are don’t know where to start.

While the requirements are supposed to be part of the IRS war against identity theft, this effort is like responding to the attack on Pearl Harbor by bombing Montreal.  Identity thieves don’t waltz into tax prep offices and pay us to prepare fraudulent refund claims.  They prefer TurboTax.

Yet, there may be a method to the madness, suggested by one practitioner.  What if some outfit is gearing up to provide third-party verification services — say, one of the national tax prep franchises?  And the IRS has quietly created their revenue stream with this absurd rule?  You might say this preparer is cynical; I say he’s been paying attention.

So let’s fight.  Kristy is collecting comments and questions to send to her erstwhile IRS colleagues to try to stop this nonsense.  Send your comments to ksmaitre@iastate.edu.  I believe the IRS will back off if we brandish the electronic torches and pitchforks.

Update, 11:30 a.m.  I received a call from an IRS representative this morning saying that they have been getting phone calls as a result of this post (well-done, readers!).  She tried to reassure me by telling me that the third-party verification doesn’t apply to in-person visits.  I knew that.  I told her that as I read the rules, there are either “in-person” or “remote” transactions, with no third category of, say, “I’ve worked with this client for many years and they’re fine.” She didn’t disagree, though she still thinks I’m overreacting.  She did say IRS field personnel are  “elevating” the issue and seeking “clarification” from the authors of these new rules, including what “authentication” means for in-person visits and what a “remote transaction” is that would require third-party verification.  Keep it up, folks!

Related:

Russ Fox, Yes, Mom, I Need to See Your ID

Jana Luttenegger, Updated E-Filing Requirements for Tax Preparers

Jason Dinesen, Hold the Phone on the IRS E-file Outrage Machine 

Me, Welcome back, loyal client. IRS says I have to verify that you aren’t a shape-shifting alien.

 


20140521-2TaxProf, 
The IRS Scandal, Day 377.

News from the Profession.  Crocodile Injured By Falling Circus Accountant in Freak Bus Accident (Going Concern)

Kay Bell, National Taxpayer Advocate joins fight to stop private debt collection of delinquent tax bills.  I’d rather she fight to keep the IRS from implementing its ridiculous e-file verification rules.

TaxGrrrl, Congress, Ignoring History, Considers Turning Over Tax Debts To Private Collection Agencies

Jim Maule, It Seems So Simple, But It’s Tax.  “People are increasingly aware that the chances of getting away with tax fraud are getting better each day.”

Missouri Tax Guy,  NO! The IRS did not call you first.

 

Tax Justice Blog, Legislation Introduced to Stop American Corporations from Pretending to Be Foreign Companies.  How about we just stop taxing them?

Kyle Pomerleau, Tom VanAntwerp, Interactive Map: Where do U.S. Multinational Corporations Report Foreign Taxable Income and Foreign Income Taxes Paid? (TaxPolicy Blog).  Holland does well, as does Canada.

Howard Gleckman, Tax Chauvinism: Who Cares Where a Firm is Incorporated?

So we are left with a sort of financial chauvinism. It is important to some politicians to be able to say that a company is a red-blooded American company. But when it comes to multinational firms in a global economy, why does that matter? 

Because, ‘Merica!

 

Andrew Mitchel now has some online tax quizzes for your amusement.  If they are too tough, the next item might restore your self-esteem.

 

20120905-1If you can’t answer these questions, taxes are the least of your problems.  Tackle these quizzlers (via Alex Taborrok):

1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow.

More than $102. Exactly $102,. Less than $102? Do not know. Refuse to answer.

2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, would you be able to buy.

More than, exactly the same as, or less than today with the money in this account? Do not know. Refuse to answer.

3. Do you think that the following statement is true or false? ‘Buying a single company stock usually provides a safer return than a stock mutual fund.’

T. F. Do not know. Refuse to answer.

I won’t give away the answers, but I shouldn’t have to.  Sadly, most people find these questions hard.  From Alex Taborrok:

Only about a third of Americans answer all three questions correctly (and that figure is inflated somewhat due to guessing). The Germans and Swiss do significantly better (~50% all 3 correct) on very similar questions but many other countries do much worse. In New Zealand only 24% answer all 3 questions correctly and in Russia it’s less than 5%.

At least that helps explain Vladimir Putin’s popularity.

 

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Tax Roundup, 1/21/14: Weaponizing the IRS. And: whither Section 179?

Tuesday, January 21st, 2014 by Joe Kristan
Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

The new, “weaponized” IRS is a focus of Glenn Reynolds, the Instapundit, in a USA Today Column:

Since then, of course, the new “weaponized IRS” has, in fact, come to be seen as illegitimate by many more Americans. I suspect that, over time, this loss of moral legitimacy will cause many to base their tax strategies on what they think they can get away with, not on what they’re entitled to. And when they hear of someone being audited, many Americans will ask not “what did he do wrong?” but “who in government did he offend?”

This is particularly true since the Obama administration is currently changing IRS rules to muzzle Tea Partiers.

While I don’t think it’s that bad yet, it’s headed that way if things don’t change.  And, as Glenn points out, it’s not changing:

Meanwhile, the person chosen to “investigate” the IRS’s targeting of Tea Party groups in 2010-2012 is Barbara Bosserman, a “long-time Obama campaign donor.” So the IRS’s credibility is in no danger of being rebuilt any time soon.

I think this is a terrible and shortsighted mistake by the Administration.  So much of its agenda, especially Obamacare, depends on effective IRS administration, but as the recent budget agreement proved, the GOP isn’t going to fund the IRS when it thinks that’s the same as funding the opposition.

The USA Today piece makes broader points about the effect of the loss of faith in civil servants as apolitical technocrats; read the whole thing.

Via the TaxProf.

Andrew Lundeen at Tax Policy Blog has two new posts on tax reform.  In Tax Reform Should Simplify the Code and Grow the Economy, he says:

We need to eliminate the biases in the code against savings and investment, so individuals have the incentive to add back to the economy, and businesses have the capital to buy new machines, structures, and equipment – all the things that give workers the ability to be more productive and earn higher wages. And we need a tax code that is simple and understandable, so taxpayers know exactly what they pay and why. 

Max Baucus

Max Baucus

We’ve been going the wrong way now for 27 years.  In Responses to Senator Baucus’s Staff Discussion Drafts, he curbs his enthusiasm for the tax reform options offered by outgoing Senate Finance Committee Chairman Baucus:

Generally speaking, we found that the tax reform proposals in these drafts go in the wrong direction. Our modeling shows that they damage economic growth, hurt investment, and, in many instances, violate the principles of sound tax policy: simplicity, transparency, neutrality, and stability.

The post links to a point-by-point examination of the Baucus proposals.

 

 

TaxProf, Martin Luther King, Jr. and the IRS:

This past year, much ado was made about the so-called “IRS-Gate” and concerns that the Obama administration may have used the agency to target Tea Party and other right wing groups. … [W]hat often is not stated during the Martin Luther King Holiday weekend is that King, early in his leadership of the Southern Christian Leadership Conference (SCLC), was routinely subjected to IRS audits of his individual accounts, SCLC accounts as well as accounts of his lawyers, first starting during the administration of President Dwight Eisenhower and continuing through the Kennedy administration.

If you audit me, I shall become more powerful than you can possibly imagine…

Kay Bell, IRS abuse of power, now and in MLK’s day. “Overall, the IRS is paying for its operational indiscretions by receiving less money and more restrictions on how it does spend what funds it has.”

 

Paul Neiffer, Section 179 Update (or Not):

 Here are my official updated odds on when we might know what the actual 2014 Section 179 amounts will be:

By Memorial Day 10 Billion to 1

By Labor Day 10 Million to 1

By the November Mid-Term elections 500 to 1

Between the November Mid-Term Elections and December 15, 2014 25 to 1

After December 15, 2014 and before January 1, 2015 1 to 1

After December 31, 2014 5 to 1

I give about 5 to 1 odds in favor of the current Sec. 179 deduction being extended to $500,000 for 2014, and I think that Paul is right that it is most likely to occur during the lame-duck session.  I think odds are about 50-50 on an extension of 50% bonus depreciation. It’s too bad the Feds have closed Intrade, as this would be a betting market I would like to follow.

 

HelmsleyTaxTrials, Leona Helmsley, Angry Employees Strike Back:

Their mistreatment of employees and squabbles over bills are the stuff of legend and left prosecutors rife with eager witnesses when it came time for trial.

Helmsley was just as arrogant about her taxes, famously telling her housekeeper: “We don’t pay taxes, only the little people pay taxes.”  Helmsley participated in several schemes to avoid paying millions of dollar in income and sales taxes.  

Sometimes that sort of thing comes back and bites you; read the post to see how it bit Helmsley.

 

William Perez on an important topic: Tips for Securely Sending Tax Documents To Your Accountant.  First, don’t send anything with your Social Security Number in an unencrypted email.  Like many firms, Roth & Company offers a secure upload platform to send sensitive information.  If your tax firm has one, use it.  They are the safest way to transmit confidential information and files.

 

Phil Hodgen wonders whether there is a Delay in approving renunciations at State Department?  It’s harder to shoot jaywalkers when they are running away.

Missouri Tax Guy goes back to basics with An Introduction to the Double-Entry Bookkeeping System.  Just remember, Debits are on the door side.

Andrew Mitchel has posted a New Resource Page: 2013 Developments in U.S. International Tax

 

Kay Bell, $4 billion more tax breaks for Boeing from Washington State. Taxing you to give money to folks with good lobbyists.

Jim Maule is appropriately annoyed by the use of the term “IRS Code.”  It’s the Internal Revenue Code, and it’s written by Congress, not the IRS.  Remember that when you vote.

Keith Fogg, Qualified Offers – Is it meaningless to offer what you think a case is worth? (Procedurally Taxing)

Jack Townsend, The New Provision for Tax Restitution and Ex Post Facto

 

The Critical Question: Is Kent Hovind A Tax Protester?  It doesn’t seem like a more promising career path for him than his forays into evolutionary biology.

TaxGrrrl, Hot Tub Tax Machine: News Anchor Takes Plea In Scandal.

 

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Tax Roundup, 8/22/2013: Is your passport worth your business? And a prodigal mom!

Thursday, August 22nd, 2013 by Joe Kristan


passport
A great post by Phil Hodgen, Why people renounce U.S. citizenship for estate tax reasons.  It’s an issue often overlooked in cheap talk of “tax cheats,” but not by those who face a tremendous hit to their family businesses from the  U.S. Estate tax:

The senior members of these families are pressuring the younger generation give up U.S. citizenship to protect against these problems. I have heard the ultimatum from the father to the son: “The business or your U.S. passport. You choose.”

I want to emphasize that I do not hear political rants from my clients, or from the other family members who must deal with having a U.S. citizen shareholder thrust upon them. Everyone I talk to is eager to travel to the United States, enjoys meeting Americans, and bears no ill will to anyone.

But faced with the prospect of destroying the family business or giving up the U.S. passport, it is no contest. The passport has to go.

40% of the value of your business, as second-guessed by the IRS, can be a high price for a passport.

 

Sorry, “Mom.”  The Tax Court yesterday found a problem with a claim for a dependent exemption:

Petitioner has failed to show that she is entitled to the dependency exemption deduction for Mr. Salako. Petitioner claimed on her 2008 return that Mr. Salako was her son. Mr. Salako was born on January 12, 1961, and was thus 47 years old at the close of 2008. Petitioner, born in 1959, is only two years older than Mr. Salako. Thus, he cannot be her biological son, and we do not find credible petitioner’s unsubstantiated testimony that Mr. Salako is her adopted son.

Decision for IRS, not surprisingly.

Cite: Golit, T.C. Memo 2013-191.

 

Scott Hodge,  Why Shouldn’t the Tax Foundation Pay Taxes?  (Tax Policy Blog):

Just 3 percent (or 6,508) of all non-profits have assets of $50 million or more. However, these organizations took in 73 percent of all non-profit revenues and commanded 81 percent of all assets held by non-profits.  

Inequality!

 

TaxGrrrl, Michael Jackson’s Estate To IRS: Beat It.  Prompting a whole generation to ask, “who’s Michael Jackson?”

 

Cara Griffith, Textbooks with Borders (Tax Analysts Blog):

Most of us have heard of doctors without borders, but has anyone heard of textbooks with borders? It’s a reality for those using Amazon’s textbook rental service. The reason for this is very likely related to Amazon’s recurring sales tax issues.

Taxes often explain seemingly bizarre behavior.

 

Kay Bell, Maryland Rep. Van Hollen sues IRS over its application of 501(c)(4) political nonprofit rules.  Good luck with that.

 

TaxProf, TIGTA: IRS May Be Violating Copyright Law on 89% of its Software.  I don’t suppose copyright violations will invalidate an assessment.

 

Missouri Tax Guy,  DOMAs Death, There Are Questions

Trish McIntire,  Rant- Keep Your Return Safe.  Certainly never send it as an unencrypted pdf attachment to an email.

Peter Reilly,  Group Claiming To Teach True Meaning Of Islam Denied Exempt Status. 

TaxProf,  The IRS Scandal, Day 105

 

The Critical Question:  WHAT DO HERNIAS AND STATE TAXES HAVE IN COMMON? (Brian Strahle)

Personal advice section: Someone Who Has Never Dated an Accountant Came Up With 15 Reasons to Date an Accountant (Going Concern)  Someone who has dated one might come up with fewer.

 

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Tax Roundup, 8/19/2013: You may already be a Californian! And the amazing tax secrets of Jeff Bezos.

Monday, August 19th, 2013 by Joe Kristan

20130819-1California is so short of cash, they aren’t just looking under their sofa cushions for spare change.  They’re looking under yours, too. Paul Neiffer reports that California is Out of Control!

In Swart Enterprises, Inc. v. Franchise Tax Board, the taxpayer was an Iowa  corporation with a farming activities in Kansas and Nebraska.  They also had various passive business investments including an .02% interest in a California LLC (Cypress) that acquired, held, leased and disposed of capital equipment in various states.  This LLC had 435 members of which 384 members were out-of-state.

The Franchise Tax Board asserted that Swart had enough business activity through their .02% interest in the Cypress LLC to require the filing of a California LLC tax return.  Normally LLC’s filed as a partnership do not owe any state tax, however, California charges $800 simply for the privilege of filing a return.  In addition, based upon the gross revenue of the LLC an additional fee is owed.  Since Swart was a corporation, that particular fee would not apply, but they would owe the $800 filing fee plus interest and penalties plus paying a person to prepare the tax return.

 That’s one of the dangers of investing in a partnership.  You buy the chance to pay state taxes in any state where the partnership does business.  In most states it may not matter because it the tax may round down to zero, but even a whiff of California can cost you $800.

Russ Fox has more at California Goes After Flow-Throughs with Passive Investments in California.

 

Stephen J. Dunn, Fraudulent Tax Returns?:

The IRS most commonly learns of alleged fraud in a tax return from an insider—a disgruntled former employee, spouse, or romantic interest of the taxpayer.  In one case, the taxpayer’s estranged daughter came to the taxpayer and asked him for a job.  The taxpayer hired her, and eventually placed her in charge of a business.  But the daughter mismanaged the business, and the taxpayer closed it.  The prodigal daughter became enraged, and reported her father to the Internal Revenue Service. 

Business tax fraud is hard to do without accomplices.  Each “helper” is one more chance for the IRS, one more potential informer.  Payroll fraud, where you pay employees “in cash,” with no taxes, may be the worst, as it gives every employee an opportunity to snitch.

 

Is the concept of “deadweight loss” a right-wing conspiracy?  “I am sorry, but this is absurd” (Tyler Cowen).  

Deadweight loss” is economic loss from tax, as  Megan McArdle explains here.  Mr. Cowan says it exists, even if fellow economist Charles Manski doesn’t care for it:

Manski also ignores that a belief in deadweight loss is fully compatible with the view that government spending may bring economic benefits.  In fact you often cannot understand the benefits of (some) government spending without first grasping the deadweight loss concept.

If you don’t think taxes have a cost, then there’s no helping you.

 

Kay Bell,  Employers in 17 states could face higher unemployment taxes

 

Missouri Tax Guy,  DOMAs Death, There Are Questions.  “It’s been nearly two months since the United States Supreme Court struck down the Defense of Marriage Act, but there are still many things we don’t know when it comes to how this affects the taxes of couples in same-gender marriages.”

 

Jack Townsend,  Simon’s Last Hurrah / Fizzle?  “So I am not sure what lessons it teaches except as a variation of the old saying, ‘Bulls make money, bears make money, pigs get slaughtered.'”

Phil Hodgen, Email and Encryption.  An interesting discussion of the problem of preserving email confidentiality in a world of hackers and NSA snooping.

TaxGrrrl, Death & Taxes: Elvis Presley Topped Charts And Tax Brackets  

Janet Novack,  IRS Agent Faked Pastor’s Letter To Claim Charity Deduction 

Russ Fox, IRS Scandal Update

TaxProf, The IRS Scandal, Day 101

 

Martin Sullivan, A Dark Cloud Over Silicon Valley (Tax Analysts Blog)

 Nobody in Washington D.C. has a wish to make enemies with tech companies that are the crown jewels of the American economy. Nobody is deliberately targeting them. But there is a basic dynamic of corporate tax reform that will be hard even for the tech sector to overcome: those who are the biggest winners under the current system have the most to lose from tax reform.

Of course.

 

Alan Cole, The Standard Deduction Undermines Itemized Deductions (Tax Policy Blog):

The standard deduction makes a lot of sense, though, if you believe itemized deductions are arbitrary and confusing. In that case, the standard deduction restores some fairness and reduces paperwork, bringing the tax code more in line with our Principles of Sound Tax Policy – particularly, neutrality and simplicity.

The standard deduction is an interesting half-step towards eliminating itemized deductions, suggesting that America is actually quite ambivalent about them.

There’s something to be said for eliminating itemizing.  It adds a lot of complexity, especially with AMT and phaseouts.  If a deduction is really needed, move it above the line and make it available to everyone.

 

Robert D. Flach, WHAT CONGRESS SHOULD DO, BUT PROBABLY WON’T.  “I have recommended limiting the mortgage interest deduction to acquisition debt on a principal primary residence.”

Me, Walnut Street is back! For lunch, anyway and Because your safety is the most important thing.

 

Tax Justice Blog,  Washington Post Owner Jeff Bezos Does Not Believe in Taxes:

As an organization that follows tax policy, we went looking for the track record on taxes and, as it turns out, Bezos and his company have consistently demonstrated a contempt for taxes and an aggressive interest in avoiding them.  

Sounds suspiciously like almost every client ever.

 

 

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Tax Roundup, 7/25/2013: Mo’ refundable credits, mo’ fraud. Plus cigarettes and preschoolers!

Thursday, July 25th, 2013 by Joe Kristan

momoneyRefundable tax credits are a magnet fo’ mo’ fraud.  Five from Mo’ Money tax prep office in St. Louis arrested in scheme (St. Louis Post-Dispatch):

Mo’ Money franchise owner Jimi Clark, 57, of Memphis, Tenn., abused the American Opportunity Credit to attract and keep clients, prosecutors said. They filed for the credit on at least 47 returns where the taxpayer had not incurred any educational expenses, and unwisely, claimed the same amount of educational expenses, $3,765, on the “vast majority” of the returns, their indictment says.

In all, the 47 returns claimed more than $50,000 in educational credits.

Maybe 25% of the rundable Earned Income Tax Credit is paid improperly.  Yet legislators ignore how the credits actually work because they like them in theory.

 

Bankrupt state pays people to be friends. Illlinois governor to sign deal to lure fertilizer plant (Sioux City Journal)

Speaking of Bankrupt… Detroit Taxes and the Laffer Curve (Alex Tabarrok):

  • [The] per capita tax burden on City residents is the highest in Michigan. This tax burden is particularly severe because it is imposed on a population that has relatively low levels of per capita income.
  • The City’s income tax… is the highest in Michigan.
  • Detroit residents pay the highest total property tax rates (inclusive of property taxes paid to all overlapping jurisdictions; e.g., the City, the State, Wayne County) of those paid by residents of Michigan cities having a population over 50,000.
  • Detroit is the only city in Michigan that levies an excise tax on utility users (at a rate of 5%).

Sometimes you can’t solve the problem with more taxes.

 

Robert D. Flach, DEDUCTING CAPITAL LOSSES

Tony Nitti, Q&A: How Can An Accrual Basis Business Defer Revenue When It Receives Cash In Advance?

Phil Hodgen, Nonfilers–voluntary disclosure is not your only choice:

But my opinion is that the official program is fabulous for someone who is in deep trouble and might otherwise face a spot of prison time.  For that person, the “Your money or your life!” demand from the IRS is easy to answer.  Give ‘em your money. 

For almost everyone else, the voluntary disclosure program is stupidly expensive–in tax cost, penalties, interest, and professional fees to give the government all of the paperwork they want.

You gotta shoot the jaywalkers so you can slap the real crooks on the wrist.

Peter Reilly, Not Good For Real Estate Loss When Tax Court Judge Says Purports

Fiduciary Income Tax Blog, Trials and Tribulations of Nongrantor Trusts

 

 

Cara Griffith, Improving Transparency in Pennsylvania (Tax Analysts Blog)

TaxProf, The IRS Scandal, Day 77

Howard Gleckman, The OECD’s International Tax Plan: The First Step on a Long Road (TaxVox)

Tax Justice Blog, CTJ Presents the Nuts & Bolts of Corporate Tax Reform

Linda Beale, Senators promised 50 years of secrecy on their tax reform proposals

Daniel Shaviro, What is a “tax expenditure” and when does this matter?

 

TaxGrrrl,  Louisiana To Offer ‘Fresh Start’ Tax Amnesty Program.  I’m sure this time they really mean this is the last one.

Missouri Tax Guy, The Enrolled Agent, EA

Jack Townsend, Fourth Circuit Holds Defendant to His Tax Loss Stipulated in the Plea Agreement

Kay Bell, Summer 2013 sales tax holidays begin this weekend

William Perez, Sales Tax Holidays in 2013

                                                              

Quotable: (my emphasis)

The manufacturing innovation institute, meanwhile, is just another iteration of an idea that’s been around for longer than Barack Obama has. Go to any Rust Belt city and you’ll find research campuses, innovation institutes and similar institutions named after hopeful politicians who promised that a new manufacturing base would coalesce around this exciting agglomeration of creative minds. Unfortunately, in most instances it has turned out that manufacturing bases would rather coalesce around cheap land, low taxes and acres of uncongested freeway.

-Megan McArdle, “Obama’s Speech Is a Confession of Impotence

 

I think one judge will think otherwise. Three South Dakota men say income taxes don’t apply to them (Argus-Leader.com)

Tax Court Judge Holmes has a new opinion out.  Always entertaining and enlightening.

News you can use:  No Such Thing as Free Swag (Austin John, Elizabeth Malm, Tax Policy Blog).  Sorry, ESPY winners.

More harebrained than what they do anyway? U.S. Senators with Harebrained Tax Reform Ideas Offered an Opportunity (Going Concern)

Maybe not where you grew up. Cigarettes and Preschoolers Don’t Go Together (Scott Drenkard, Noah Glyn, Tax Policy Blog)

 

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Tax Roundup, 7/17/2013: Stories of wounded jaywalkers. And: checking in on Rashia.

Wednesday, July 17th, 2013 by Joe Kristan

taxanalystslogoMarie Sapirie of Tax Analysts has an excellent piece about how the IRS offshore account enforcement program treats the thousands of ordinary Americans abroad — and many green card holders living in the U.S. —  as presumptive tax criminals when they try to remedy foot-fault paperwork violations in reporting offshore accounts.  She tells the stories of four “minnows” who tried to remedy inadvertent minor violations of the foreign account rules.  Get a load of the advice they gave “Taxpayer 3:”

The taxpayer, like many others, sought help from a congressional representative in reaching a satisfactory resolution with the IRS. The response that the lawmaker received from the IRS — that the taxpayer could renounce U.S. citizenship — was disappointing. “I lived in the U.S. for 30 years; I never was treated unfairly for 30 years. I was proud of it. And here the IRS is telling me to renounce my citizenship
because it may be the best solution considering my situation,” the taxpayer said.

When the IRS is telling people to expatriate themselves, something is very wrong.

The article discusses the headaches involved in clearing up FBAR reporting, including the delays caused because IRS agents aren’t allowed to make international phone calls.

The IRS should imitate programs for state non-filers for FBAR violations: allow taxpayers to come in penalty-free anytime if they file disclose their accounts and amend returns for five years back to report any unreported offshore income.  Time to stop shooting the jaywalkers.

20130717-1

Rashia Wilson in happier times.

While Doug Shulman’s IRS was busy shooting jaywalkers, the grifters were running wild.  TampaBay.com has an update on the woman who boasted on her Facebook page that she was the “queen of IRS tax fraud”: IRS loss to fraud’s ‘first lady’ may have hit $20 million:

Rashia Wilson may have duped the IRS out of as much as $20 million before her arrest on stolen identity refund fraud charges.

That’s according to a court document, filed in advance of her sentencing today, that estimates the government’s loss at $7 million to $20 million.

What kind of criminal mastermind could break through the internal controls at IRS to loot that kind of money?

“YES I’M RASHIA THE QUEEN OF IRS TAX FRAUD,” reads a May posting on her Facebook page described in the affidavits. “IM’ A MILLIONAIRE FOR THE RECORD SO IF U THINK INDICTING ME WILL BE EASY IT WONT I PROMISE U!”

Well done, Shulman!  Criminal masterminds like Ms. Wilson are robbing the Treasury of $5 billion annually, and you are busy telling taxpayers trying to come into compliance to renounce their citizenship.

Prior tax update coverage: Identity theft tax fraud: women’s work?

Jason Dinesen, Taxpayer Identity Theft — Part 16. “The IRS still has not processed Brian and Wendy’s final joint tax return for 2010.”

 

Inspector General finds “willful” rummaging through political “candidate or donor” records, but Justice Department declines to prosecute.  This is a big deal.  All we know is that it is sometime after 2006.  Failing to prosecute that is shocking; it’s hard to imagine a good excuse.  Tax Analysts reports today ($link) that IRS denies any of its employees were involved.

TaxProf, The IRS Scandal, Day 69

Kay Bell, Justice Department refusal to prosecute IRS disclosure of taxpayer information prompts inquiry from GOP Senator

Janet Novack,  Former IRS Auditor Gets Probation For Taxpayer Info Leak, Conflict Of Interest.  “Dennis Lerner admitted disclosing information about an audit of
Commerzbank AG and seeking a job with the German bank even as he was still negotiating a $210 settlement with it.”

 

William Perez, Same Sex Marriage, the Windsor Case and Estate Planning

Paul Neiffer, Capital Gains Questions on Selling Farmland

Missouri Tax Guy, Choose your tax pro? A rundown on the difference between CPAs, Enrolled Agents and other preparers.

 

Kay Bell, IRS will be fully staffed July 22 as furlough day is canceled

TaxGrrrl, IRS To Remain Open For Business As Furlough Day Is Canceled

 

Joseph Thorndike, Tax Expenditures Should Be Attacked Head On, Not Through the Backdoor (Tax Analysts Blog).

David Brunori, Immigrants are Good for Us (Tax Analysts Blog)

Howard Gleckman, Will Obamacare Delays Encourage Health Exchange Cheating?  (TaxV0x). Just because we can’t verify that you’re not cheating won’t result in massive cheating, according to Mr. Gleckman.  Let’s ask Rashia about that.

Russ Fox, The Most Ridiculous Tax Ever.  He’s talking about the insane “PCORI” fee.

Tax Justice Blog, North Carolina Facing Disastrous New Tax Laws.   The “disatrous” changes include reduction of the individual rate to 5.75% (currently 7.75%) and the corporate rate to 5% (from 6.9%).  If that’s a disaster, here’s hoping for one in Iowa.

Elizabeth Malm, More Details Released on North Carolina Compromise Plan and North Carolina House, Senate, and Governor Announce Tax Agreement (Tax Policy Blog).

 

Jack Townsend,  UBS Client, 78 Years Old, Sentenced to One Year and One Day

There are no athiests in taxholes.  Economist who dodged tax due to ‘religious objection’ gets four years behind bars (New York Post)

 

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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, 7/2/2013: Apologies, newlyweds and civil wars!

Tuesday, July 2nd, 2013 by Joe Kristan
Taxpayer Advocate Nina Olsen

Taxpayer Advocate Nina Olsen

Kay Bell doesn’t much care for the Taxpayer Advocate’s “apology payment” proposal,  where the IRS would pay $1,000 as a token of apology to taxpayers who had gotten the runaround from the agency:

In order to avoid spurring an apology payment, employees could be reluctant to challenge taxpayers in situations where such added attention is warranted. The ensuring refusal by workers to aggressively, but fairly, go after taxpayers will make for a less, not more, effective tax enforcement agency.

So instead of establishing an apology payment system, the $1 million should instead go to the IRS for it to do its job, albeit do it better. That’s also recommended by Olson in her report.

So Kay probably wouldn’t much care for my “sauce for the gander” rule, which would impose penalties on the IRS, payable to the taxpayer, anytime the IRS maintains an unreasonable position on audit.  I would also apply it automatically anytime the IRS asserts an accuracy-related penalty and then loses in court on the underlying issue.

 

Jana Luttenegger, IRS Statement on DOMA and Tax Tips for Newlyweds (Davis Brown Tax Law Blog).

The IRS quietly issued a statement on June 27. Quite, likely because it was of little value to any taxpayers. The statement is available from the IRS Newsroom, and essentially states they are reviewing the recent decision, and will “move swiftly to provide revised guidance in the near future.”

In what may or may not be a coincidence, the IRS Summer Tax Tip released today relates to Tax Tips for Newlyweds.

So maybe the IRS does have a sense of humor.

TaxGrrrl, As Taxpayers Scramble To Make Sense Of DOMA, IRS Issues Statement

 

Russ Fox,  Licensing Stops All Tax Preparer Fraud…Well, No.  But it does make it fraud with a government seal of approval.

 

Howard Gleckman,  New Study: Tax Subsidies Do Little To Reduce Greenhouse Gas Emissions.  But they do help keep stray birds out of foreign airspace.

Missouri Tax Guy, Travel Expenses.  Why these expenses are not like the others.

TaxProf, IRS Scandal, Day 54.

Jack Townsend, Depositor Pleads to Failse Return; Depositor in Luxembourg Branch of Israeli Bank

William Perez, “Blank-Slate” Tax Reform Proposed by Baucus, Hatch

Tax Justice Blog, Top Senate Tax-Writers’ Call for “Blank Slate” Approach to Tax Reform Avoids Most Crucial Issue

Martin Sullivan, Tax Reform: Coming Around the Clubhouse Turn? (Tax Analysts Blog)

Clint Stretch, Tax Reform or Shotgun Wedding? (Tax Analysts Blog)

Tax reform, we are told, will encourage economic growth by reducing complexity, inefficiency, and unfairness.  It probably could, but there are no guarantees.  I have had to read most of the tax legislative histories written in the past 40 years.  I cannot recall any instance in which the committee reports confessed that the wrong balance of fairness, economic growth, and simplification was struck.

Yet it would have been true every time.

 

Kyle Pomerleau, Misleading Corporate Tax Talk: (Tax Policy Blog)

When a company pays employees, either through wages or stock options, they are legitimately allowed to deduct that compensation.

It is not like this money is never taxed. This compensation is taxed as ordinary income at the individual level.

A point often overlooked when they talk about stock option “loopholes.”

 

Janet Novack, GAO: Big Companies Paid A 12.6% Effective Federal Income Tax Rate

Jeremy Scott, Obama’s Climate Change Proposals Lack Major Tax Component (Tax Analysts Blog).  They also lack a snowball’s chance in a high-carbon Hades.

TaxDood, GAO: Bitcoin Presents Tax Compliance Risks

It’s Tuesday, so it’s time for a fresh Buzz from Robert D. Flach. 

 

grant126

Grant at work.

Peter Reilly is taking a few days off from his usual tax topics to cover commemorations of the 150th anniversary of the Battle of Gettysburg, which occurred July 1-3, 1863:Hopes of Our Country Were on Our Bayonets

Gettysburg Day 1 – First Shot – Where Fate Meets History

Gettysburg Day 1 – Passing Into Legend And History With The Iron Brigade

I’m sure there will me more great posts.  But remember that this week is also the 150th anniversary of the fall of Vicksburg to General Grant  — a more spectacular campaign and arguably a more important achievement, but not so well-remembered as Gettysburg.

 

 

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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, 4/2/2013: Your corporate welfare is my wise economic development incentive. And what’s a vampire, anyway?

Tuesday, April 2nd, 2013 by Joe Kristan

20130117-1Not your corporate welfare.  Just ours.  Iowa Senate taxwriters have been eloquent in criticizing the corporate welfare famously doled out to fertilizer companies over the last year.  It turns out, though, that not all corporate welfare is bad, to them.  Just that proposed by the other party.  The Senate Ways and Means Committee advanced a set of its own welfare programs yesterday, including:

SF 238, which would provide a 30% tax credit (subsidy) “for persons who construct, install, and place in service an electric vehicle facility or a natural gas vehicle facility.”  So if you buy a Chevy Volt, Senate Ways and Means wants to pay 30% of the cost of installing special plug-ins.

SSB 1240, which “increases to $50 million from $45 million the amount of historic preservation and cultural and entertainment district tax credits.”  These are a cash cow for well-connected developers and rehabbers.

SF 205, which opens up an existing program to divert withheld employee taxes “to create economic incentives that can be directed towards business.”  The bill “removes the requirement that an employer…be located in an urban renewal area.”  In other words, it makes it just another “incentive” slush fund to pay people to be our friends.

So it’s not a principled opposition to business subsidies.  They just want different ones.

Far better to get the state out of the subsidy business and make the tax system good for everyone — not just those with the pull and the consultants to game the system.  Far better to enact The Tax Update’s Quick and Dirty Iowa Tax Reform Plan.

Related:  New Jersey corporate tax breaks surge, but economy lags: study

 

The courts haven’t been kind to the IRS preparer regulation power grab, but some preparers welcome our new preparer regulation overlords.  An example is Three reasons why the IRS will persist in its mission to regulate tax return preparers (Jim Buttonow)

The article takes for granted that the costs the regulations will impose will exceed the benefits:

Knowledgeable  tax return preparers—who are reminded each year through education requirements to  conduct effective due diligence on small businesses—can have a much greater  impact on compliance than IRS auditors.

That makes an unwarranted assumption: that the IRS can create “knowledgeable tax return preparers.”  It can’t.  It can make people fill out paperwork, go through the motions of paying for CPE, and take meaningless open book literacy competency tests, but it can’t make anybody competent.

The IRS has limited resources.  Semi-literate South Florida grifters are stealing billions through fraudulent refunds.  Yet the IRS seems to think its problem is honest preparers.

 

Smoke ‘em if you can afford ‘em. Monday Map: State Cigarette Tax Rates, 2013 (Nick Kasprak, Tax Policy Blog).

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Ben Harris, Hiking Dividend Taxes to Pay for a Corporate Rate Cut (TaxVox):

Finland will lower the corporate rate to 20 percent in 2014, down from the current rate of 24.5 percent (and 26.0 percent in 2011)…

Finland plans to pay for part of the rate cut by boosting the effective investor tax rate on dividends paid by companies listed on the Finnish stock exchange.

Why not instead create a full dividends-paid deduction.  It would eliminate the need for a rate preference for dividend inocme while eliminating the destructive double-tax on corproate earnings.

 

Russ Fox,  Bozo Tax Tip #9: Foreign Trusts

Paul Neiffer,  The Two Week Check List

Missouri Tax Guy,  Residential Energy Tax Credits 2012

William Perez,  Tips for SEP-IRA Contributions

 

Kay Bell, Tax Carnival #115: Final filing crunch 2013

Jeremy Scott, Tim Johnson, Kristi Noem, and the Importance of Moderates to Tax Reform (Tax.com)

The Myth of Crumbling Highways (David Hartgen).  A useful counterpoint to the construction interests lobbying for higher gas taxes.

Peter Reilly, Taxpayer Beats Idaho On Domicile But Loses On Community Property

 

Going Concern had fun yesterday for April Fools day.  This one puzzled me, though: Twilight Remake to Feature Auditors Instead of Vampires.  Isn’t that like saying the Daytona 500 will feature automobiles instead of cars?

 

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Tax Roundup, 3/26/2013: Snatching defeat from the jaws of preparer-regulation victory. And: Iowa leads, UK follows on film.

Tuesday, March 26th, 2013 by Joe Kristan

20130326-1Film tax credit scams are big news in the U.K. right now.  An Irish actress, Aoife Madden, yesterday received a 54-month sentence in her role in scamming a U.K. film tax credit scheme.  Irish Times reports:

The group successfully claimed £1.5 million in film tax breaks after they said they intended to make a film titled Landscape of Lives  with a £19 million budget, funded by Jordanian backers.     

Once they were arrested two years ago, the five hurriedly produced a film called, ironically, Landscape of Lies for just £90,000, which went on to win a Silver Ace award from last year’s Las Vegas Film Festival.     

The film, which starred former EastEnders actor Marc Bannerman and Andrea McClean, told the story of a former British soldier’s attempts to discover the truth behind his friend’s murder in an apparent mugging.     

Before suspicions had been aroused, Madden’s London film company, Evolved Pictures, told revenue and customs that millions had been spent on Hollywood A-list actors and film crew when it lodged a value added tax repayment application for £1.48 million. It received more than £1 million.

Lost in the coverage is Iowa’s pioneering role in film tax credit scams.  A little-known film producer from Minnesota came here and showed the Brits just how it’s done:

Take Iowa. A start-up called Polynation Pictures came looking for backing for a sci-fi flick so lame it would have embarrassed Ed Wood. With a financing scheme worthy of Max Bialystock, the con these folks pulled was nearly as inept as the film they made, but Iowa’s film office was too starry eyed to notice.

The $767,250 production Polynation Pictures proposed eventually came in at $3.7 million. This was achieved in part with preposterous expenses. Producers claimed they paid $1,350 to rent six orange road cones. The use of two 6-foot ladders supposedly cost the company $900 (a bargain, as Polynation claimed to have spent another $900 to rent a single 8-foot ladder). Among production necessities was a new Mercedes. The partners set up an array of separate companies and used them to bill themselves extravagantly for work supposedly done on the picture. These were presented to Iowa as “deferred payments”—to be paid if the movie made money (which the enterprise was sure to do when Iowa handed the tax credits over). The only thing missing was a staged rendition of “Springtime for Hitler.”

Polynation mastermind Wendy Weiner Runge received 10 years for her star turn in the film credit program.

The film credit program was touted as a way to make Iowa a leader in the film world.  And, in a way, it did.

You might be interested in this interview with Ms. Madden about her role in the film, knowing what we know now.  She said this:

This project has been a crazy but wonderful challenge!! I’ve always wanted to produce a feature, and have a number of projects in development, but this was the one I just wanted to lift off the page. I think the biggest challenge was sourcing finance, which is no surprise for an independent film company. We were extremely lucky to find international investors and lobby them to back the project, but this was a lengthy process and has always been a challenge.

A challenge, yes, but I’m not sure they turned out lucky.

 

Snatching defeat from the jaws of victory. Now that the courts have saved the IRS from itself by shutting down the misguided preparer regulation system, the Senate rides to the rescue to screw everything up again, Accounting Today reports:

The two leaders of the Senate Finance Committee, Chairman Max Baucus, D-Mont., and ranking Republican member Orrin Hatch, R-Utah, have begun developing proposals for reforming the U.S. Tax Code, including giving the Internal Revenue Service the clear statutory authority to regulate tax preparers in case the IRS loses its appeal of a recent court case invalidating its Registered Tax Return Preparer regime.

The IRS can’t answer its phones.  Its pockets are being picked to the tune of billions by semi-literate South Florida grifters.  And the Senate thinks that preparers are the problem?   Preparer regulation is a market-share enhancement program for the national franchise tax prep outfits;  the rules were written by a former H&R Block CEO.  If Senators Baucus and Hatch want to re-enact these anti-competitive and useless rules, it just shows who they really represent.  (Via Going Concern). 

 

Howard Gleckman,  Congress Has Not Passed A 2014 Budget, and Probably Won’t (TaxVox).  Why do that, when Henry and Robert have other chores for them?

Joseph Henchman,  Senate Votes on Tax Proposals, Including State Taxation of Internet Commerce.  (Tax Policy Blog) Amazon taxes seem inevitable.  Otherwise Wal-Mart can’t compete with a guy selling things from his basement on the Internet.

Brian Strahle,  The Marketplace Fairness Act:  Is It Really Fair?

Kay Bell,  Online sales tax a step closer with Senate budget amendment

Thanks, you’ve helped enough already.  A New Proposal to Promote American Manufacturing (Martin Sullivan, Tax.com).

 

Jack Townsend, Supreme Court Will Decide Whether B____t Tax Shelters with Basis Overstatements Draw the 40% Penalty

Tony Nitti,  What Are Your Odds Of Being Audited By The IRS?

TaxGrrrl, Taxes From A To Z (2013): N Is For Notice Of Deficiency

Missouri Tax Guy,  Social Security Benefits, are they taxable?

Patrick Temple-West, Proposals to tax trades spark financial firm lobbying, and more (Tax Break)

Peter Reilly,  Has Scalia Already Thrown In The Towel On Same Sex Marriage ?

Dan Meyer, “Where No Tax Rate Has Gone Before…”

Trish McIntire,  That Reminder – 2013. “Your Failure to Plan Is Not My Emergency!”  The tax preparer April battle cry.

 

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Tax Roundup, 3/12/2013: What tax protester “victory” really means.

Tuesday, March 12th, 2013 by Joe Kristan

20130312-2It just doesn’t work.  The “Tax Honesty Movement” got excited a few years back when Louisiana attorney Tom Cryer was acquitted on criminal tax charges.  For example:

The Internal Revenue Service has lost a lawyer’s challenge in front of a jury to prove a constitutional foundation for the nation’s income tax, and the victorious attorney now is setting his sights higher.              

“I think now people are beginning to realize that this has got to be the largest fraud, backed up by intimidation and extortion and by the sheer force of taking peoples property and hard-earned money without any lawful authorization whatsoever,” lawyer Tom Cryer told WND just days after a jury in Louisiana acquitted him of two criminal tax counts.

There’s just one problem with the idea that this struck a death blow to the income tax:  he still owes the taxes.  Even though he’s dead.  Being aquitted in a criminal tax case doesn’t make it legal to not pay taxes any more than the O.J. Simpson acquittal legalized multiple homicides in Brentwood.

The Tax Court yesterday ruled that Mr. Cryer owes taxes, interest and civil fraud penalties for tax years for which he didn’t file income tax returns.  From the Tax Court:

In essence, Mr. Cryer claimed that the income he received during the tax years at issue from certain “sources” was taxable under Louisiana law, but not under Federal law. In United States v. Clayton, 506 F.3d 405, 412 (5th Cir. 2007), the Court to which an appeal would lie in this case, cited and followed its prior unpublished opinion holding that “the argument that income derived from sources within the United States” is not taxable under Federal law is “patently frivolous” and “absurd”.

The moral: No matter how convincing they are on the Internet, “Tax Honesty” arguments don’t work.  They will not keep the IRS from taxing you.  When “winning” means staying out of jail but paying 75% civil fraud penalties, you set the bar for victory too low.

Cite: Cryer, T.C. Memo. 2013-69

Related: Daniel B. Evans, The Tax Protester FAQ

Prior Coverage:  ‘NOT GUILTY’ DOESN’T MEAN ‘NOT TAXABLE’

 

Nick Kasprak, Weekly Map: State and Local Sales Tax Rates, 2013 (Tax Policy Blog)

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Peter Reilly,  Carried Interest Debate Heats Up Without Much Light .  A reasonable outline of the issues involved in the so-called “loophole” for private equity:

If “carried interest” were really just a loophole it would not need such an elaborate fix.  In fact, it is based on fundamental principles of partnership taxation.

I don’t think it’s a problem, so I don’t think it needs fixing.  Related:  New York Times Dealbook, Why Carried Interest Is a Capital Gain.

 

Tony Nitti, Contrarian Tax Planning: Increasing Income To Take Advantage Of The AMT

Missouri Tax Guy, Is that Gift Taxable?

Martin Sullivan, Showdown in Kansas: Realtors vs. Governor (Tax.com).  Will Kansas eliminate the home mortgage deduction on its state returns?

Jeffrey M. Kadet,  Tax And Territoriality: The Corporate 99% Versus The Law School 1%

William Perez,  IRS Plans Spending Cuts Due to Sequestration.  They can’t answer their phones, but they still want to regulate preparers.

Kay Bell,  NYC soda ban overturned. Would a soda tax have been better?  Maybe better, but still unwise.

TaxGrrrl, Former Detroit Mayor Found Guilty On Multiple Counts, Including Tax Charges.  Poor Detroit.

 

Tax News from the Animal Kingdom.

Beavers’ tax-evasion trial to begin (WGNTV.com)

Former Bear Chris Zorich charged in tax case  (WGNTV.com)

Fmr. Eagle Freddie Mitchell pleads guilty in tax scheme (6ABC.com)

 

Remember, Calendar 2012 1120 and 1120-S returns are due Friday!

 

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Tax Roundup, February 25, 2013: And the award for the dumbest economic development tax credit goes to…

Monday, February 25th, 2013 by Joe Kristan

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Field of bad dreams.  TheFiscalTimes.com says Iowa is the ninth worst state for taxes:

The Hawkeye State gets a black eye for being the second worst state for corporate taxes, with a 12 percent rate. It also ranks 37th in property taxes, 33rd in individual income taxes and 34th in unemployment insurance taxes.

 They accompany the article with this photo of the “Field of Dreams” — an unwitting illustration of the problems of Iowa tax policy.  The Governor last year signed a proposal giving a special sales tax exemption to a private athletic complex being built around the field, made slightly famous in the Kevin Costner movie.  It’s special carve-outs like this that make for high rates and complicated taxes all around.

 

Speaking of movie-related scams, Instapundit Glenn Reynolds writes in the Wall Street Journal The Hollywood Tax Story They Won’t Tell at the Oscars.  Here he talks about how it worked out in Michigan:

State leaders ballyhooed the plan as a way of moving from old-style industry to new.           

Despite tens of millions of dollars in state investment, the promised 3,000-plus jobs didn’t appear. As the Detroit Free Press reported last year, the studio employed only 15-20 people. That isn’t boffo. That’s a bust. The studio has defaulted on interest payments on state-issued bonds, and the guarantors—the state’s already stressed pension funds—may wind up holding the bag. “In retrospect, it was a mistake,” conceded Robert Kleine, the former state treasurer who signed off on the plans in 2010.

He doesn’t neglect Iowa’s film fiasco:

Iowa ended its motion-picture subsidies in 2010, after officials misused $26 million in state money, leading to criminal charges. According to a 2008 investigation by Iowa Auditor David Vaudt, 80% of tax credits issued under the state’s film-subsidy program had been issued improperly (to production companies that weren’t even spending the money in Iowa, for example).

 

Two film credit recipients are now serving 10-year sentences on theft charges arising from the program.  That’s fine, but I really want to see a groveling public apology from the Governor who signed the program into law, the “economic development officials” who turned the keys to the state treasury over to a former Walgreens photo desk clerk in charge of the program, and to the legislators — all but three out of 150 — who voted the moronic program into existence.

 

 

Sequestration panic at the IRS.  Politico adds IRS cuts to the least of things we’re supposed to freak out about in the face of the tiny impending sequestration spending cuts:
“At a minimum, it’s probably going to take longer for people to get through on the phone; it’s going to take longer for refunds to be processed,” said Floyd Williams, a senior tax counsel at Public Strategies Washington.

Williams, who worked for the IRS for nearly two decades and directed the agency’s legislative affairs office for 16 years, says the sequester could also be a boon to those who purposely commit fraud, or accidentally fill out returns incorrectly.

Good thing the IRS can redirect the employees who had been assigned to the preparer regulation program to do something useful, now that the courts have shut down that futile enterprise.  The IRS can’t stand their good fortune, though; Tax Analysts reports ($link) that the IRS is appealing the court decision.

It would be even better if Congress stopped using the IRS as the Swiss Army Knife of public policy.  Given the agency’s new mandate to take care of our health insurance, their performance at the job of actually collecting taxes is only going to get worse.


Preparers gone bad.  Accounting Today rounds up the week in preparer fraud, including a guy in New Mexico who, while serving time for identity theft-related charges, has been hit with 56 counts of fraud and embezzlement.  That would be overachieving in underachieving.

 

Hak Ghun will travel.  To Club Fed. From DurangoHerald.com:

Durango man pleaded guilty to tax evasion this week in federal court in New Mexico.

Hak Ghun, 62, is facing 12 to 18 months in prison after signing a plea agreement with the U.S. Attorney’s Office. He also will be required to pay $249,567 in restitution to the Internal Revenue Service.

The man was accused of embezzling from a company that had received investments from the Navajo Nation. For those who don’t get the old TV show reference, here you go.


 

Paul Neiffer,  Safe to File After March 1

If a fire is worth fighting, it’s worth fighting in style.  But the firefighter still can’t deduct the Benz.  My new post at IowaBiz.com, the Des Moines Business Record blog for entrepreneurs.

Janet Novack,  The Forbes 2013 Tax Guide

Peter Reilly, Don’t Be Fooled By E-Mail ‘From IRS’ – But Don’t Ignore Their Snailmail

Jim Maule,  Tax Law Provision Enforceable Even if Unwise.  That would be most of them.  For example…

Tax Effects of the Health Care Act (Missouri Tax Guy)

Patrick Temple-West, Payroll tax’s return hits retailers, and more (Tax Break)


These guys are what I call real public servants.  Vigilantes fighting revenue-driven traffic enforcement (The Telegraph, London).

Breaking:  Women Are Not Men: A New Freakonomics Radio Podcast

Today’s Going Concern employment tip: Accountant on Probation for Embezzlement Still More Employable Than the Average Non-Accountant (Temporarily)

 

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Tax Roundup, 2/14/2013: Happy Valentine’s Day! Oh, and tell me more about your illegal tax shelter, honey!

Thursday, February 14th, 2013 by Joe Kristan
Wikipedia image

Wikipedia image

The TaxProf Reports: IRS Whistleblower Office Issues Annual Report to Congress.  It looks like ratting out tax cheats could be lucrative.  Changes requiring the IRS to issue more awards were enacted in 2006, and it appears that the whistleblowers have done well.  In 2012, for example, 128 awards were paid totalling $125,355,799, according to the report.  That works out to nearly $1 million each.

Awards may well be one of the most effective ways to enforce the tax law, as well as one of the most creepy.  They make every disaffected employee a potential IRS mole.  Sure, it may make employment awkward for the whistleblower, but $1 million cash can be very consoling.

But before you go racing to the IRS, consider this sobering news from the report: From 2008 through 2012, whistleblowers reported 33,064 cases to the IRS, but awards were paid only 630 times.  That means about 1 in 50 claims cashed out.  Because the IRS collection process is slow, some more of those claims will get paid out, but the great majority won’t.

The moral?  If you have a Valentines Day date, be careful how much of your tax life you share.  Love is one thing, but cold hard cash is something else entirely.

 

I’ll start that diet right after I finish this cheesecake:

Treasury nominee Lew calls tax reform top priority (Reuters)

Obama Proposes Tax Incentives for Manufacturing (Tax Analysts, $link)

If tax reform is a top priority, you don’t start the process by adding more gimmicks to the code.

 

You mean not all appraisals are trustworthy?  Ohio Federal Court Bars  Appraiser of Historic-Preservation Easements. From a Department of Justice press release:

A federal court in Cleveland has barred MAI-designated real estate appraiser Michael Ehrmann and his firm, Jefferson & Lee Appraisals Inc., from preparing property appraisals for federal tax purposes, the Justice Department announced today. Judge Dan Aaron Polster of the U.S. District Court for the Northern District of Ohio signed the civil injunction order against Ehrmann and Jefferson & Lee Appraisals. The defendants consented to the injunction without admitting the allegations against them. 

Federal law allows a taxpayer in certain limited circumstances to claim a charitable deduction for the value of a conservation easement donated to a qualified organization. The easement’s value must be determined by a qualified appraiser. According to the government complaint, Ehrmann’s appraisals repeatedly overstated the value of conservation easements placed on historic properties, including the Book Cadillac Hotel in Detroit and the Powerhouse Building in the Flats District of Cleveland.

The tax law is very touchy about the rules for appraisals.  The obvious potential for abuse shows why.

 

A sad story from Buffalo.  A tax preparer scammed his own clients, reports buffalonews.com:

Elizabeth Wopperer lost everything. She lost her business. She lost $40,000 in cash. And by the time it was all over, she found herself filing for bankruptcy.

On top of all that, the IRS now wants the money that was stolen from her.

The man she blames is going to federal prison for up to 30 months, but that won’t return the cleaning business she was forced to sell or pay the taxes she now owes because of his fraudulent actions.

What happened?

Mangione, the operator of a North Tonawanda payroll and tax preparation business, was supposed to pay federal income taxes on behalf of his clients but didn’t.

He chose instead to pocket some of the money, which means Schunke, Wopperer and several others are still on the hook for those taxes.

There’s no reason to give money to your preparer to pay your taxes.

 

Gene Steurle, Why Tax and Transfer Programs Often Discourage Work and Savings (TaxVox):

 The tax code also is loaded with disincentives to work, save, and study.  They include PEP and Pease (reductions in tax allowances for personal exemptions and itemized deductions), child tax credits, and the earned income tax credit. These implicit taxes combine with explicit taxes to create incentives for many households that are often inefficient and inequitable, to say nothing of strange and anomalous.

That’s why proposals to increase the earned-income credit are pernicious.  The phase-outs of the benefits as incomes rise punish taxpayers for improving their lot.

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But I thought nobody moved because of state taxes! Two Dozen Companies Announce California Departures, Citing Higher Taxes (Joseph Henchman, Tax Policy Blog).

Cara Griffith, Income Redistribution Has No Place in State Tax Systems(Tax.com) The goal of taxes should be to finance operation of the government.  The tax commissioner is not Handicapper General.  When states try to soak the rich, they’ll rinse them right across the state line.

 

Kay Bell, Mistakes on child tax credit form are delaying some returns

Paul Neiffer, Don’t Forget the “Magic Blurb” on Donation Acknowledgements!  A cancelled check by itself doesn’t get you a charitable deduction over $250.

Missouri Tax Guy, Maximize your Travel & Entertainment Benefits.

TaxGrrrl, The Cost Of Health Care Insurance, Taxes and Your W-2

Patrick Temple-West,  Vital New York City property taxes lost, and more (Tax Break)

Andrew Mitchel, 48% Decrease in Number of Expatriates for 2012

Jack Townsend,  Interview of R. J. Ruble, A Tax Lawyer Incarcerated for Tax Shelter Crimes.  Sobering.

 

Say, what time is it?  Madness Time. (Christopher Bergin, Tax.com)

If you are thinking of proposing tonight, check out An Updated Marriage Bonus and Penalty Calculator for Valentine’s Day from Roberton Williams at TaxVox before you commit!

News you can use. The SEC is Developing an Army of Robots to Replace You (Going Concern)

 

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Tax Roundup, 2/12/2013: Tax fraud, queens and princesses. And 21 lawyers!

Tuesday, February 12th, 2013 by Joe Kristan

Meanwhile, somewhere an ID thief is trying to get cash from an ATM with a peanut butter sandwich.  TBO.com reports:

A 6-year-old pupil at Symmes Elementary School in Riverview was asked to take her homework out of her backpack, according to Cpl. Bruce Crumpler of the Hillsborough County Sheriff’s Office.

The girl reached into her bag and pulled out a baggie containing 52 debit cards, Crumpler said.

The cards, which can be used as accounts for depositing tax refunds are commonly used by people who use stolen personal identities to file tax returns to obtain fraudulent refunds.

20130212-1Maybe she’s the little princess of tax fraud.  Meanwhile, the same TBO.com has an update on Rashia Wilson, who allegedly proclaimed herself the “Queen of IRS Tax Fraud:”

Wilson may not have been the biggest player in Tampa’s income tax fraud explosion, but she was one of the most brazen — “flashy,” a sheriff’s investigator called her, “in your face about it.”

The affidavits show Wilson even had a picture of herself with a cool smile on her face, wearing an oversized jewel-encrusted pendant spelling out her first name as she held bundles of cash.

“YES I’M RASHIA THE QUEEN OF IRS TAX FRAUD,” reads a May posting on her Facebook page described in the affidavits. “IM’ A MILLIONAIRE FOR THE RECORD SO IF U THINK INDICTING ME WILL BE EASY IT WONT I PROMISE U!”

Easier than she thought, apparently.  She has been indicted on 57 federal tax fraud charges for collecting $1.3 million through fake tax returns, apparently claiming earned income credits and refundable education credits.  That should make the politicians think twice before they expand these fraud-ridden credits, but it won’t.

 

How many lawyers does it take to lose a tax case?  15.  At least that’s how many lawyers were listed on the losing side yesterday in Bank of New York Mellon Corp., a Tax Court case disallowing foreign tax credits in a tax shelter case.  Six lawyers are listed on the IRS side, for a total of 21.  The losing side was led by former IRS Chief Counsel B. John Williams.  If nothing else, the legal expense deductions should take a bite out of the losing side’s tax bill.  The TaxProf has more.

 

Iowa’s push for a 4.5% optional flat tax — which I call an “alternative maximum tax” — puzzles David Brunori ($link)

Many liberals in Iowa are complaining that a flat tax wouldn’t require the rich to pay their fair share, whatever that means. But a lot of those people seem more interested in soaking the rich than in helping the poor. Personally, I am much more in favor of reducing the tax burdens on the poor and dispossessed than I am in making rich people suffer.


     I think a flat income tax with few deductions (and a sizable exemption for low-income people) is the way to go. I’m unsure why the state would continue its horribly complicated personal income tax system that benefits return preparers, tax lawyers, and tax accountants.

It’s because of a peculiarity of Iowa politics.  The powerful lobbying group Iowans for Tax Relief opposes a repeal of the Iowa deduction for federal taxes paid.  ITR has shown that it can provoke successful primary challenges of Republican legislators who displease the Muscatine-based lobby.  Yet significant rate reduction is impossible if the deduction is retained.  Making the lower rate an “alternative” rather than a replacement appeases Muscatine, though at a cost in incoherence.

 

Will we see a revival in enforcement of the accumulated earnings tax?  The obscure depression-era tax on C corporations that retain cash in excess of their “needs,” as second-guessed by the IRS, is rarely asserted.  With left-side economists like Paul Krugman asserting that corporate cash-hoarding is one reason why the economy remains weak, don’t be surprised if his friends in the Obama administration try to revive enforcement of this archaic and foolish penalty tax. (Via Tyler Cowen).

 

William McBride, CBO Projections of Spending and Tax Credits (Tax Policy Blog):

As the chart below shows, mandatory spending represents the majority of the federal budget, and the part that has grown most dramatically in recent years.  Mandatory spending was about 10 percent of GDP for most of the 30 years prior to 2008.  It leapt to 15 percent of GDP in 2009 and now remains at 13.1 percent.  It is projected to increase to 14.1 percent of GDP by 2023.  Meanwhile, discretionary spending, on programs like defense, roads, and other infrastructure, is on a steady decline.  Discretionary spending is now 8.3 percent of GDP and set to go to a 50 year low of 5.5 percent of GDP by 2023.

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No spending is really “mandatory.”  Congress and the President can always change the “mandatory” programs.  And they will, or we will face fiscal disaster and crushing taxes.

 

Paul Neiffer,  Farmer Filing Due Date Update

Yes.  Will Obama’s Call for Tax Reform Ring Hollow? (Jeremy Scott, Tax.com).

TaxGrrrl, A Beginner’s Guide To Taxes: Do I Need To Hire A Tax Preparer Or Can I Do My Return Myself?

William Perez, Finding the Right Filing Status

Patrick Temple-West,  Sandy damage leads to tax trouble, and more (Tax Break)

Peter Reilly,  Co-op Owner Wins Casualty Loss Appeal

Missouri Tax Guy, Safeguarding Financial Records

Brian Strahle,   Delaware’s NEW Voluntary Disclosure Program for Unclaimed Property:  Should You Utilize It?

Jack Townsend,  Good Faith as a Defense to Tax Crimes

 

The Critical Question:  Would a Carbon Tax and Corporate Tax Reform Taste Great Together? (Donald Marron, TaxVox).

Kay Bell, Man gets $161,392 erroneous tax refund.  And in this case he didn’t even ask for it.

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

Wednesday, February 6th, 2013 by Joe Kristan

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

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

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

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

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

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

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

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

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

 

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

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

None of these are incompatible with lower top tax rates.

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

 

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

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

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

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

 

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

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

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

William Perez, IRS Provides Further Disaster Relief for Hurricane Sandy

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

Jim Maule, Tax Ignorance As Persistent as Death and Taxes

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

Trish McIntire, Low Cost Tax Preparation Options

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

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

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

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

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

 

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

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

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

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

 

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

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

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

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

 

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Tax Roundup, 1/29/2013: The best tax proposal ever. Also: tax season delayed for students and parents.

Tuesday, January 29th, 2013 by Joe Kristan
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Flickr image courtesy Pasa47 under Creative Commons license

A Tax I can support!  Tax the Revolving Door (Glenn Reynolds)

In short, I propose putting a 50% surtax — or maybe it should be 75%, I’m open to discussion — on the post-government earnings of government officials. So if you work at a cabinet level job and make $196,700 a year, and you leave for a job that pays a million a year, you’ll pay 50% of the difference — just over $400,000 — to the Treasury right off the top. So as not to be greedy, we’ll limit it to your first five years of post-government earnings; after that, you’ll just pay whatever standard income tax applies.

Plus make them wear clown clothes to work.  (Via the TaxProf)

 

Allysia Finley,  Mickelson and the Sports Star Tax Migration (Wall Street Journal):

About 3.5 million Californians have migrated to other states over the past two decades. Almost anywhere they chose to go would allow them to enjoy greater returns on their labor. Is it really surprising that athletes like Mr. Mickelson might be keeping an eye on the leaderboard?

It would be surprising if they didn’t.

 

Kyle Pomerleau and William McBride:  EITC Awareness Day (Tax Policy Blog)

Research has shown that the EITC is associated with higher workforce participation among certain populations.  However, Casey Mulligan’s research shows there is no free lunch here, since the EITC creates disincentives to work over the income range in which it phases out (roughly $20,000 to $50,000).  And because the EITC is one of many overlapping anti-poverty programs, such as unemployment insurance, they all add up to huge disincentives to work among the poor.

And some Iowa politicians want to increase the Iowa EITC, making it a bigger poverty trap.

 

Steven Rosenthal,  Chairman Camp Agrees: Too Many Choices Burden our Tax System (TaxVox)

Jeremy Scott, Huffington Post Draws Tenuous Link Between Camp Plan, Fix the Debt Group (Tax.com)

Robert D. Flach,  GUIDELINES FOR TAX REFORM:

Recognize and acknowledge that the purpose of the federal income tax is to raise the money necessary for the administration of the government and government sponsored programs.  It is not to be used to “redistribute income” or as a method for delivery of social welfare and other government benefits.

If that principal were vigorously applied to the tax law, the 1040 would fit on a postcard.

 

Climb in the Cavalcade!  Worker’s Comp Insider hosts the latest Cavalcade of Risk roundup of insurance and risk-management posts, including Insureblog on the Curly Bulb Menace.

Russ Fox,  Form 8863 Added to Returns that the IRS Won’t Accept Just Yet.  The form for tuition credits.

William Perez,  When Can You Begin Filing Your 2012 Federal Tax Return?

Jason Dinesen,  Taxpayer Identity Theft, Part 11.  In which the IRS ignores the change-of-address filing and mails a long-delayed refund to the wrong address.

Martin Sullivan, Taxing Financial PollutionOn the futility of a financial transactions tax. (Tax.com)

Missouri Tax Guy,  What you’ll Need.  A guide to gathering your tax return information.

TaxGrrrl,  Tax Season Kicks Off January 30th: Here’s What’s On Tap

Jack Townsend,  IRS Issues John Doe Summons to UBS (All Over Again)

Kay Bell,  Deducting sales tax on your new car … or boat or airplane or home

What does his politics have to do with anything?  Liberal man sentenced to federal prison for tax evasion (Topeka Capital Journal Online)

What does his species have to do with anything?  Beaver County sheriff’s deputy convicted of tax evasion (Pittsburgh Post-Gazette.com)
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Tax Roundup, 1/22/2013: Phil, we have altered the deal. Pray we don’t alter it further.

Tuesday, January 22nd, 2013 by Joe Kristan
Wikipedia image

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What’s it cost to be a successful golfer in California?  Phil Mickelson says his tax rate in California for 2013 is 62%.  He doesn’t like it.  Naturally he is called a whiny rich guy and told to suck it up.

What is his real rate?  He will be paying a real federal rate, considering the itemized deduction phase-out, of 40.788%.  His California rate will be an insane 13.3%.  That will be deductible on his federal return, so the net combined income tax rate is about 48.662%,

But there’s more!  Golfers are independent contractors, so they have to pay self-employment taxes. That rate is 3.8% in 2013, but 1.45% can be deducted on the federal return, so the net is about 3.19%.  That gets his rate up to about 51.856%, or so.

In 2011, Lefty’s combined rate worked out to about 42.589%.  That means his effective rate increased by about 9.266%.  But that understates it.  Think of Phil Mickelson as a business.  His after-tax profit on a given income level has taken a real hit.  Where after-tax income was about 57.411 cents out of every dollar in 2011, now its about 48.144%.  That means his after-tax income has fallen by about 16% – nearly 1/6.  Don’t think it matters? Try it sometime with your own after-tax income.

A 16% cut in margins would be a worry in any business.  Mr. Mickelson is in a business where he can boost his margins by nearly 8% with a moving van.  He’d be an odd businessman indeed if he didn’t give the idea serious consideration.  And he will have plenty of company.

 

Jason Dinesen,  Further Thoughts on Preparer Regulation:

My concern is more for the EA [Enrolled Agent] name itself. I really fear that EAs are getting pushed further and further to the margins. We’ve always been on the margins, so how much further can we be pushed?

The problem is, there’s no good solution for how to enhance and protect the EA name, because there’s so few of us.

So again, where do EAs fit in? There’s just not a good answer or good solution.

I thought the RTRP designation was a mortal threat to the EA brand.  Enrolled Agents have to pass a much harder IRS-administered test and more rigorous CPE than the RTRPs would face.  Yet few people know what an enrolled agent is.  If IRS wants to improve the caliber of tax preparers, they should give more publicity to the existing EA designation and make it more desirable.  But that doesn’t help them expand their power over all preparers.

Robert D. Flach proposes a voluntary Registered Tax Return Preparer designation.    I have no problem with a voluntary branding, and if Robert and other unenrolled preparers can make a brand of it, more power to them.   I don’t see it happening, though, as it would do nothing for the big franchise preparation companies, who already have their own brands.

Martin Sullivan, “Now it’s about loopholes.”

Republicans want to use revenues from base-broadening solely to reduce rates. Democrats want to use revenues from base-broadening solely to raise revenue. (The quote in the title of this post is from senior Obama advisor David Plouffe.)

We will never be able to begin the tax reform process in earnest until Republicans and Democrats settle their differences on the total amount of revenue the federal government can collect. It was actually Bowles and Simpson who outlined the process: First, you settle on a number for the amount of revenue you want to raise (if any). In their case the amount of revenue was $800 billion over 10 years (using a different baseline).  Second, you broaden the base as much as possible. The money from base-broadening is first devoted to deficit reduction and whatever is left over is used for rate reduction.

That requires agreement on how much we can afford to spend.  Until that answer changes from “MOAR!” it won’t be enough.

 

Brian Strahle, ALERT:  California Sales Tax Refund Opportunity: Optional Service Contracts.  If you bought a service contact on a Dell and paid California sales tax, you may have a refund coming.

Peter Reilly,  Tax Planning – Repairman Jack Style

Missouri Tax Guy,  Tax Issues with early Distributions from Retirement savings.

William Perez,  Qualified Charitable Distributions from IRAs for 2012.  You have until January 31.

Kay Bell, Alternative minimum tax still around, but now indexed for inflation

Jack Townsend,  More on Conscious Avoidance

Yes.  Are Taxes Progressive in the US? (Paul Neiffer)

Not if you are Phil Mickelson.  Can You Use the 1040EZ? (Trish McIntire)

News you can use: JUST SAY “NO” TO HENRY AND RICHARD  (Robert D. Flach)

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Tax Roundup, 12/26/2012: legislator wants a $310 million train set for Christmas.

Wednesday, December 26th, 2012 by Joe Kristan

Iowa’s legislators get $800 million to play with for Christmas. Naturally, many of them think they can spend it better than those of us who gave it to them, based on a Des Moines Register report today quoting a bunch of prominent state politicians.

For example, Joe Bolkcom, Iowa City Democrat and Chair of the Senate Ways and Means Committee:

“We have a silent crisis in the number of kids and the number of our children living in poverty in our state,” Bolkcom said. “One of my top priorities will be addressing that crisis as a matter of tax policy. We need to use some of this tax surplus to make a substantial boost in the earned income tax credit.”

Bolkcom also favors appropriating $20 million as a state match to help  secure an $87 million Federal Railroad Administration grant to establish passenger train service between the Quad Cities and Iowa City, a move he says would create hundreds of jobs.

That’s two awful ideas.  As we have pointed out, increasing Iowa’s earned income credit would impose a brutal combined effective income tax rate of over 50% on low income workers — rewarding dependency and punishing taxpayers for emerging from poverty.

20121226-1And for the passenger rail plan — that’s ten kinds of crazy.  With the Megabus making three daily runs between Chicago and Iowa City for no more than $39.50 — and for as little as $1.50 — it’s hard to imagine a less urgent priority than pouring $20 million into a $310 million federal-state boondoggle to establish rail service that will lose millions annually selling $42 tickets for slower service.

Unfortunately, none of the politicians quoted by the Register proposes using the surplus to overhaul Iowa’s dysfunctional and business-hostile income tax. There is a better way:  Lower the rates, simplify the system, repeal the job-killing corporation income tax, and eliminate the corporate welfare deductions and tax credits.  In other words, The Quick and Dirty Iowa Tax Reform Plan.

Related:  You’d better waste your $20 million, or we won’t waste our $80 million!

 

Fiscal Cliff Notes

Kay Bell,  With the Mayan end of world threat over, it’s time to focus on the fiscal cliff

Can I return it?  AMT, the Gift You Don’t Have to Wrap!  (Trish McIntire)

 

Paul Neiffer,  One Week to Go Checklist

Missouri Tax Guy, Can an LLC be Taxed as an S Corp

Jason Dinesen,  Dinesen Tax Greatest Hits – The 5 Most Popular Blog Posts of 2012

Scott Hodge,  Taxing Guns to Pay for Cops in Classrooms? A bad idea to fund another bad idea.

That’s the way to bet, anyway.  Sometimes the Cynics Are Right  (Russ Fox)

Loss carryforwards?  Why Santa Won’t Owe Any Income Taxes This Year (TaxGrrrl)

Robert D. Flach won’t let the post-holiday letdown kill his Buzz!

Because I want to finish reading the phone book first?  Why Not Read the Entire Sales Tax Statute? (Jim Maule)

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

Monday, December 17th, 2012 by Joe Kristan

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

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

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Fiscal Cliff Notes

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

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

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

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

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

TaxGrrrl,  Budget Resolution May Come Down To One Question

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

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

Robert D. Flach,  WHAT FOOLS THESE POLITICIANS BE!

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

 

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

Megan McArldle discusses an interesting pension funding approach:

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

Just kidding. 

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

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

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

Paul Neiffer,  Another Nice Feature of a Living Trust

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

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

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

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

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

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

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

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

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