Posts Tagged ‘Nanette Byrnes’

Tax Roundup, 4/30/2013: Iowa due date edition. Send them your cash, so they can forward it to thieves.

Tuesday, April 30th, 2013 by Joe Kristan
Via Wikipedia

Via Wikipedia

Legislator insists that thieves get $11 million as price of property tax deal.  As Iowans pay their 2012 balances due on today’s state income tax deadline, they may want to take a moment to ponder how careful the legislature is about spending the money they are sending in.

The Des Moines Register reports that Senator Joe Bolkcom demands an increase in the Iowa earned income credit as the price of a property tax bill:

Sen. Joe Bolkcom, D-Iowa City, chairman of the tax-writing Senate Ways and Means Committee, spoke at a Statehouse news conference sponsored by The Coalition for a Better Iowa, which released a booklet with the stories of Iowans who have been helped by the earned income tax credit. About 200,000 Iowa working families receive the tax credit, which assists households with incomes under $45,000.

Senate Democrats want to raise the earned income tax credit from 7 percent now to 20 percent at a cost of about $55 million annually.

Both Sen. Bolkcom and the Register fail to mention the massive fraud rate of the earned income tax credit.  The Treasury Inspector General for Tax Administration this month reported:

The IRS estimates that 21 to 25 percent of EITC payments were issued improperly in Fiscal Year 2012. The dollar value of these improper payments was estimated to be between $11.6 billion and $13.6 billion.

Applying that fraud percentage to Sen. Bolkcom’s proposal will result in $11.5 million to $13.75 million in “improper” — mostly fraudulent — Iowa EITC payments.   Remember that the EITC is a “refundable” credit, which means that if it exceeds your tax, the state writes you a check.  It’s a spending program, a welfare program.

I would say it takes a special kind of legislator to demand $55 million in spending knowing that it’s an appropriation of at least $11 million to thieves, but really it just takes a run-of-the-mill legislator spending your money instead of his own.

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

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


Only somebody who doesn’t prepare tax returns would say something this stupid.  The TaxProf links to this from a University of Wisconsin academic:

 This Article analyzes the ongoing structural transformation by observing and explaining the advantages that accrue from pursuing social and regulatory objectives through the tax code. In particular, this Article identifies a number of legislative and normative advantages that tax-embedded policies offer.

The tax law has one important job: to raise revenue.  If this author had ever done business tax returns for a living, she would know what a challenge it is to simply determine taxable income.  If she had ever helped a client through an IRS audit, she would know how difficult it is for the agents to simply work through the accounting, let alone run a bunch of social programs on the side.  The author should be made to spend three years working at a storefront tax prep business to learn the chaos her views cause outside the faculty lounge.


Tony Nitti,  Overview Of The New 3.8% Investment Income Tax, Part 2: Passive Activities

Jeremy Scott, Baucus, the Marketplace Fairness Act, and Tax Reform (

Baucus’s shift to the right in the last few months (which people had assumed was positioning for the election next year) has antagonized more than just progressives.  It seems his Senate colleagues are growing frustrated as well. 

And that will severely hamper the chances that a major tax reform bill will make it to the Senate floor.


Judge Sentences Widow to Less Than a Minute of Probation in Tax Case (Accounting Today)

TaxGrrrl, Willie Nelson, Who Saved His Career And His House With The IRS Tapes, Turns 80

Nanette Byrnes,  Republicans pursue tax reform, and more  (Tax Break)


Brian Strahle,  STATE TAXES:  WHAT WILL MAKE YOUR COMPANY CHANGE – CHOICE or AUDIT NOTICE?  On not being in denial about your exposure to business taxes in other states.

Jack Townsend, a criminal tax defense attorney, offers some wise advise in  Tips to Avoid an IRS Criminal Investigation or, Worse, a Tax Grand Jury Investigation


It’s time for Robert D. Flach’s Tuesday Buzz!


Always heed tax policy advice from a violent cannibal boxer.  Boxer Mike Tyson TKOs Fox host with talk pro-tax talk (Kay Bell)

Martin Sullivan, To Balance the Budget: Tax Sex Appeal (  Yes. by all means cut my taxes.



Tax Roundup, 4/12/2013: Friday frenzy edition

Friday, April 12th, 2013 by Joe Kristan

20130104-1We’re down to the wire, so we’re going with a bare-bones roundup today.  Filing deadline is Monday, kids!


Kay Bell, 3 ways to e-pay your tax bill

Peter Reilly,  April 15 What To Do If You Don’t Have The Dough

TaxGrrrl,  Last Minute Tax Filing Tips

Russ Fox,  Bozo Tax Tip #1: Don’t Be Suspicious!

Me: Does my share of partnership debt let me deduct K-1 losses?  Yesterday’s 2013 Filing Season Tip.  One-a-day through Monday.  Today’s goes up later this morning.  Collect them all!


Kyle Pomerleau, TPC, What About the “Pass-Throughs?”. (Tax Policy Blog). Measuring business taxes needs to look beyond corporation taxes when most businesses are taxed on 1040s.


Nanette Byrnes,  Middle class tax hikes loom in Obama proposal despite pledge, and more (Tax Break)

Janet Novack, Could Obama’s Plan To Curb The Boss’ Tax Breaks Hurt Workers’ Retirements?   They want you to save, unless you are too good at it.

Roberton Williams,  Taxing Millionaires: Obama’s Buffett Rule (TaxVox)  “But it turns out that setting a floor on the taxes rich people pay is not so easy.”

David Cay Johnston, Promises, Promises (  “Candidate Obama promised in 2008 to reform the Alternative Minimum Tax, and President Obama promised at least an honest accounting in his first budget, but his proposed budget for Fiscal 2014 is silent on the issue.”

Tax Trials,  Can the IRS Read Your Email?

Jack Townsend,  Restitution, Relevant Conduct, Counts of Conviction.  What gets counted when a judge orders a tax criminal to pay restitution?


Unclear on the concept:  When you steal somebody’s identity and claim their tax refund, having the refund check mailed to the victim’s home defeats your purpose.



Tax Roundup, 3/8/2013: IRS tackles ex-Bear Zorich. And: higher taxes, less compliance.

Friday, March 8th, 2013 by Joe Kristan

1991PacificIllegal procedure.  Former Chicago Bear Chris Zorich has been flagged.  CBS Chicago reports:

Zorich, 43, was charged Thursday with four misdemeanor counts of failing to file federal income tax returns, for the years 2006 through 2009, according to the U.S. Attorney’s office. During that time, he allegedly had an income of more than $1 million.

Federal prosecutors said Zorich was cooperating with the investigation and has agreed to plead guilty.

His lawyer says that he owes no more than $70,000 after withholding on the non-filed years is applied.

I wonder why he was charged.  While it’s a bad idea, it’s not extremely rare for people to just get behind on filing their returns.  It doesn’t usually lead to criminal charges.  Much of his income for the years at issue was W-2 income, so it wasn’t as though the IRS would miss him.

Perhaps he did something to annoy an examiner enough to call in the Criminal Division.  Maybe it’s because he is an attorney [update: he apparently never passed the bar exam].   Or maybe he’s just unlucky to be famous-enough for the IRS to use his celebrity to frighten the rest of us into getting our returns done. (Via Reason 24/7)

Update: This Chicago Tribune report suggests that self-dealing with his charitable foundation may have been a factor.


In other tax crime news:

Jack Townsend: Article on Deterrence Through Criminal Enforcement and Defining Tax Shelters

Miami Vice: Two Miami Officers Accused Of Tax Refund Fraud (CBS Miami)

William Perez, Tips for Preparing Form 1040-EZ

Janet Novack, IRS Yanks Criminal Amnesty Deal From Taxpayers With Secret Bank Leumi Accounts. If the IRS turns on taxpayers who turned themselves in under an amnesty, not many folks will participate in another one.

Russ Fox,  When the IRS Changes the Rules Midstream in a Legal Matter…


J.D. Tuccile,  As Government Grasps For Taxes, Brace for an Unwinnable War Against You (  It’s a long-form essay on the way getting all sorts of social services from the government doesn’t make people happy to pay their taxes.  This is interesting:




Those who think tax increases alone can solve our ongoing fiscal disaster are just kidding themselves.


Paul Neiffer,  What Are W2 Wages for DPAD?  You have to have paid W-2 wages to use the Section 199 deduction.  But they don’t all work:

These wages cannot include wages paid to your children under age 18 (if a  sole proprietor farmer) and commodity wages.  However, wages paid in cash to spouses and children over age 17 are allowed as part of these wages. 

If you are a schedule F farmer with no employees, the W-2 requirement makes the Section 199 deduction worthless.


Jim Maule,  Selecting a Tax Return Preparer.  All sound advice, including this:

Seventh, ask the tax professional about data security. Where and how is paper data stored while in the hands of the preparer? Where is the digital data stored? What precautions are in place to minimize the chances of a third party breaking into the office or the digital servers and obtaining information? If the individual hands over paper records without keeping copies, which is an unwise move, what happens if the tax professional’s office burns down?

Something to think about.


Nanette Byrnes, State defections impact U.S. interstate tax compact (Tax Break)

TaxGrrrl,  Taxes From A To Z (2013): D Is For Disaster Relief

William McBride,  Latest IRS Data Shows Taxable Returns Remain Below 1997 Levels (Tax Policy Blog).  The income tax burden falls on fewer and fewer returns.

Howard Gleckman,  Build America Bonds, the Medicaid Expansion, and Trust Between the States and the Feds

Tony Nitti,  Congress Looks To The Wealthy To Bail Out Social Security.  But the rich guy isn’t buying.


If you ever wonder why California is the Titanic of state governments, you might want to read Kay Bell’s latest, Tax on email suggested as way to help fund U.S. Postal Service:

Berkeley City Councilman Gordon Wozniak has tossed out the idea of an email tax to help save snail mail.

The financial straits of the U.S. Postal Service became an issue for Berkeley lawmakers when the paper mail delivery system proposed closing that northern California city’s downtown post office and selling the building.

It won’t happen, but a state where somebody who thinks it could happen can be elected to public office is pretty much doomed.



Tax Roundup, 1/18/2013: Iowan gets 87 months on Ponzi, tax charges.

Friday, January 18th, 2013 by Joe Kristan
87 months?  Holy Cow!

87 months? Holy Cow!

Iowan gets 7 years on Ponzi scheme, tax charges.  An Ottumwa man who used funds he was supposed to invest to finance his online dating life was sentenced yesterday to 87 months in federal prison on federal fraud and tax charges.  John Holtsinger, 52, will serve the federal sentence after he completes a state OWI sentence.

Mr. Holtsinger entered a guilty plea last year.   The indictment said he sold this improbable investment opportunity:

After conducting trades on behalf of investors for a short period of  time, Holtsinger offered and sold investments to the investors in the form of promissory notes.  He represented that the notes would yield high returns with no risk including, but not limited to, what he called an “inheritance investment” that would be invested through his mother and pay out upon her death.  The “inheritance investment” required a $20,000 deposit and was to pay annual returns of 9% with automatic liquidation and payout if the investment dropped below 3% of its initial value.

“High returns with no risk” is a rare beast indeed, nearly as rare as the Unicorn.  I doubt if they show up in Ottumwa very often.


IRS stimulates prison system economy by $35 million in 2010.  From a report by the Treasury Inspector General for Tax Administration:

Refund fraud committed by prisoners remains a significant problem for tax administration. The number of fraudulent tax returns filed by prisoners and identified by the IRS has increased from more than 18,000 tax returns in Calendar Year 2004 to more than 91,000 tax returns in Calendar Year 2010. The refunds claimed on these tax returns increased from $68 million to $757 million. Although the IRS prevented the issuance of $722 million in fraudulent tax refunds during Calendar Year 2010, it released more than $35 million.

The new IRS regulation of tax preparers isn’t going to do much for this problem.  (via the TaxProf)

Related: Doing Your Time (Jack Townsend)


TaxGrrrl, As We Creep Closer To The Debt Ceiling Limit, Is Your Tax Refund At Risk?

Kay Bell, Government report fuels fear (again) of federal mileage tax proposal

Russ Fox, The Walking Dead Come Back.

Brian Mahany,  Taxpayer Advocate Questions OVDI, FBAR Penalties

David Cay Johnston, Foundering Tax Avoidance (

Paul Neiffer,  Watch Out For Those Retroactive State Tax Gotchas!

Nanette Byrnes, Facebook’s slump hits California’s budget, and more (Tax Break)

Joseph Henchman and Elizabeth Malm, New Report: Gasoline Taxes and Tolls Pay for Only a Fraction of Road Spending (Tax Policy Blog)

Catch your weekend Buzz early!  From Robert D. Flach.

Howard Gleckman,  A Tiny Little Blog Post on a Tiny Little Tax Bracket. (TaxVox).  Hey, I noticed it first!

News you can use:  Retaining CPAs Is As Easy As Letting Them Work in PJs and Attend Boring Meetings, Says Guy (Going Concern)


When outsourcing goes too far.  A story of how a model employee outsourced his own job. (Greg Mankiw).  Nice work if you can get paid while some guy in China does the dirty work.


Tax Roundup, 1/10/2013: Taxpayer Advocate says we need tax reform. No kidding!

Thursday, January 10th, 2013 by Joe Kristan

20130110-1So preparer regulation wasn’t really the solution?  Taxpayer Advocate Nina Olson says tax complexity is the biggest problem for taxpayers in her annual report:

The most serious problem facing taxpayers — and the IRS — is the complexity of the Internal Revenue Code (the “tax code”). Among other things, the tax code:

-Makes compliance difficult, requiring taxpayers to devote excessive time to preparing and filing their returns;

– Requires the significant majority of taxpayers to bear monetary costs to comply, as most taxpayers hire preparers and many other taxpayers purchase tax preparation software;

– Obscures comprehension, leaving many taxpayers unaware how their taxes are computed and what rate of tax they pay;

– Facilitates tax avoidance by enabling sophisticated taxpayers to reduce their tax liabilities and by providing criminals with opportunities to commit tax fraud;

– Undermines trust in the system by creating an impression that many taxpayers are not compliant, thereby reducing the incentives that honest taxpayers feel to comply; and

– Generates tens of millions of telephone calls to the IRS each year, overburdening the agency and compromising its ability to provide high-quality taxpayer service.

What do you suppose clued her in?

The byzantine complexity of the tax law is indeed the biggest problem facing the taxpayer.  She also prominently mentions the identity theft epidemic, preparer fraud and IRS funding.  One item not identified as a serious problem?  Unregistered tax preparers.

Just a few short years ago, Nina Olson had this to say:

 I have recommended the regulation of unenrolled return preparers since my 2002 Annual Report to Congress, and reiterated and supplemented that recommendation in successive reports.  My office was very much involved in  the analysis and discussions resulting in the IRS report, and I applaud Commissioner Shulman’s leadership in undertaking this significant review.

So what has that accomplished?  The IRS has tacitly admitted the program isn’t working by waiving the continuing education requirement.  The population of preparers is poised to crash.  That will raise the cost of tax preparation, forcing many to self-prepare and driving others out of the system entirely.  Meanwhile, one reason IRS resources are unavailable for taxpayer service is that they are directed to mismanaging preparer regulation.

The problem has always been tax complexity, and it continues to get worse.  No preparer regulation will change that.  The Taxpayer Advocate’s previous preparer regulation efforts only served to enrich the national tax prep franchises and distract from the real problem of complexity while damaging the ability of the IRS to serve taxpayers.

More on the Taxpayer Advocate report:


Russ Fox, “The IRS Has Failed to Provide Effective and Timely Assistance to Victims of Identity Theft”

Jack Townsend,  TA Report Identifies IRS’ OVDP / OVDI As Problem


20130110-2Scott Drenkard, Nobel Laureate James Buchanan Passes Away at 93 (Tax Policy Blog):

Buchanan’s model of government action was based on a theory of “politics  without romance,” which contended that policymakers act in their own self-interest the same way that market actors do. This means that politicians are not enlightened, selfless despots, and respond to the incentives of the political sphere, making policy that will help get them re-elected. Often the best way to do that is by catering to special  interests. The longer I work in this city, the more I see this observation as true to life.

This is (to me) the essence of the “Public Choice” analysis of government, created by Mr. Buchanan and Gordon TullockIt explains why passing a law or creating a regulation rarely solves the problem, and instead enables the well-connected to use the government as a club against their rivals.  The tax preparer regulations, literally authored by a former H&R Block CEO, are a classic example.  James Buchanan’s legacy is a valuable and too-little-heeded caution against increasing the role of government.

More: Alex Tabarrok,  James Buchanan (1919-2013), Appreciations; David Henderson, Further Notes on James Buchanan


TaxGrrrl, Leadership Shakeup At Treasury May Signal Change in Obama’s Fiscal Strategy

Courtney Strutt Todd:  Buying a House in 2013? You Could Qualify for a Federal Tax Credit up to $2,000 a Year for the Life of Your Mortgage! (Davis Brown Tax Law Blog)

Paul Neiffer,  IRS Announces When Returns Can Be Filed

Kay Bell, IRS will begin accepting 2012 tax returns on Jan. 30

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

Brian Strahle,  Medical Device Excise Tax:  Ready or Not, It’s Here!

Nanette Byrnes, Virginia plan to end gas tax quickly panned (Tax Break)

The Critical Question: What Is It About Hollywood? (Cara Griffith,


Tax Roundup, 12/21/2012: Plan B breaks, Tiger tamed.

Friday, December 21st, 2012 by Joe Kristan

20121221-1Plan C through Z?  House Speaker Boehner’s effort to pressure the White House into compromise with “Plan B,” a proposal to retain 2001 tax rates on incomes below $1 million, died last night.  The Speaker cancelled a vote on the plan when it was clear that it lacked enough support to pass.  The Wall Street Journal reports:

After pulling his bill without taking a formal vote, Mr. Boehner  unexpectedly disbanded the House until after Christmas, leaving behind
uncertainty about whether Congress and President  Barack Obama would be able to avoid $500 billion in spending cuts and tax increases that begin in January.

So what now?

“The House did not take up the tax measure today because it did not have sufficient support from our members to pass,” Mr. Boehner said in a written statement after a brief meeting with House Republicans. “Now it is up to the president to work with Senator Reid on legislation to avert  the fiscal cliff.”

Is it time to panic?  Will we see a filing season delayed until the end of March, a big 2012 AMT hit, and tax increases all around?  Joe Weisenthal at Business Insider says we aren’t over the cliff yet:

Indeed. If Boehner couldn’t even get the GOP to support a law that would let taxes revert on millionaires, how is he going to get GOP support on a deal that would let taxes revert on those making $250K or $400K, as the President would like to sign?

Here’s the thing with that. Boehner doesn’t need to get all of his caucus, because in the end, if Obama supports the ultimate compromise, then it’s safe to say that the Democrats will bring about 100+ votes in the house to support the bill. And this was always true. It was always the case that the eventual compromise would see Boehner lose 70 or more Republicans, to be made up with Democrat support. So nothing changes on that front.

There’s 10 days left before 2012 expires.  Even then it’s possible that they will make a retroactive deal next year with the new Congress.  The legislative and leadership malpractice continues.

Fiscal Cliff Notes:

TaxProf,  The Competing Obama and Boehner Tax Plans

Kay Bell, Republicans reject Boehner’s fiscal cliff Plan B, House breaks for Christmas

TaxGrrrl, Boehner Fails To Push Through Plan B Before House Walks

Christopher Bergin,  Fiscal Surrender (

So, I would suggest that while General Boehner wants things to look like  he is negotiating a budget deal, he is actually seeking the best surrender terms that he can get. And if the President is a good enough general to understand his position, he will not try to over-exploit it.

Paul Neiffer,  Farmers Might Delay Higher Tax Rates for Three Years?  Thanks to income averaging, a trick available only for farmers,  “…you might be able to earn $1 million from farming and have most of it still subject to the old lower tax rates” if rates go up next year.

Nanette Byrnes,  Blue states lose: how avoiding the U.S. fiscal cliff hits some states harder than others (Tax Break)

Tax Policy Blog, Tax Cut Expiration Would Impact States Unevenly

Janet Novack,  A Closer Look At Boehner’s Plan B: Tax Hikes For Parents And Workers

Howard Gleckman,  Should Working Class Families Pay Higher Tax so High Income People Can Pay Less? (TaxVox)

Jim Maule, The Postponed Pain of Foolish Tax and Spending Decisions


St. Louis area preparer “Tiger” Zerjav pleads guilty to tax crimes.  A St. Louis-area CPA who survived an IRS effort to shut down his practice through a civil suit lost a much bigger fight yesterday.  Frank “Tiger” Zerjav pleaded guilty to four tax crime counts in Federal District Court. Courthouse News Service reports:

Frank L. “Tiger” Zerjav Jr., 39, of Wildwood, Mo., pleaded guilty to  four counts of tax evasion from 2001 to 2004, prosecutors said.
     He  and his father, Frank L. Zerjav Sr., were principals in two entities:  Zerjav & Company, a full service accounting firm, and the Advisory  Group USA, which offered tax planning and asset protection strategies.      Zerjav admitted that he funneled his income into several S-corporations and failed to include that income on his tax returns.

The IRS attempted to enjoin the Zerjavs from tax practice in 2008, alleging that they set up S corporations for their clients and then deducted personal expenses on corporation tax returns — including a “Precious Moments” figurine collection.   The Zerjavs settled under what appeared to be favorable terms in 2010.

The plea agreement is not yet public.  Sentencing is set for March 26RelatedCopy of indictment.


Jason Dinesen, New Preparer Requirements on Earned Income Credit = Higher Fees for Clients.  That’s on top of the increase in fees that will result from the massive contraction of the preparer industry that we may be in for thanks to the IRS preparer regulation regime.

News you can use:  Pot Business May Be Legal In Washington State But There Are Still Rules (Peter Reilly)


The Critical Question:  Are Holiday Weddings a Form of Tax Planning? (Jana Luttenegger, Davis Brown Tax Law Blog):

Your  marital status for tax purposes is determined as of December 31. That means if you get married on New Year’s Eve, you are considered married for the entire year and can file as a married couple. Likewise, if a divorce is finalized by the end of the year, you will be considered unmarried for the entire year. Trust me, I am not the  only one that has wondered if certain people getting married on New Year’s Eve did it for tax purposes.

It’s a special Friday Buzz at Robert D. Flach’s place!

Madoff’s brother sentenced on tax charges (Wall Street Journal, via Going Concern)


Not so Fat Joe not so good at taxes.  A rapper who performs as “Fat Joe” is in tax trouble, reports AP.  The story says Joseph Cartagena pleaded guilty yesterday to not reporting nearly $3 million in income over two years.

Oddly, he’s not so fat, according to the story:

Wearing a navy suit, Cartagena looked fit and considerably slimmer than the former size that had earned him his rapper nickname. He has been very public about his efforts to shed weight after fellow rap stars died from obesity-related issues and was recently in Newark to speak to schoolchildren about health and fitness.

It’s nice that the schools find such good role models for the kids.



Tax Roundup, 12/11/2012: Red Oak! And impossible dreams.

Tuesday, December 11th, 2012 by Joe Kristan

The Tax Update is in Red Oak, Iowa today for the seventh tour date for the Iowa State University Center for Agriculture and Taxation Farm and Urban Tax School.  This is our first visit to Red Oak.  From Wikipedia:

Red Oak is a city in and the county seat of Montgomery County, Iowa, United States,[3] located along the East Nishnabotna River. The population was 5,742 in the 2010 census, a decline from the 6,197 population in the 2000 census.[4][5]


The community has had a disproportionate number of casualties in the Civil War and World War II.

In the American Civil War, the area provided more Union troops per capita than any other in the state.[10] Company M (which also included residents from Montgomery County had 160 casualties among its 250 members; 52 men were killed in action.[11]

Early World War II battles claimed a disproportionate number of soldiers from Red Oak (although the final casualty statistics tend to disprove the oft-repeated statement that Red Oak suffered more losses per capita than any other American community).[10][12][13] In the Battle of the Kasserine Pass in February 1943, forty-five soldiers from Red Oak alone were captured or killed.[14] At the time more than 100 telegrams arrived in Red Oak saying that its soldiers were missing in action.[15]

Here is the crowd:


I can confidently endorse the Red Oak coffee and donuts.  Register now for the last session next Monday in Ames!


Eric Toder,  The Coming AMT Debacle. (TaxVox)   If Congress fails to pass an alternative minimum tax “patch,” the AMT is slated to rise drastically for 2012:

Overall, AMT liability will rise from $34 billion to $120 billion. Of that $86 billion increase, new AMT taxpayers will owe $64 billion—an average of about $2,250–while those currently on the tax will pay another $22 billion—an increase of about $5,500 each over the nearly $8,500 average they would pay with a patch.

If you suspect that a tax that affects 32 million households is not limited to the rich, you are right. It is true the enhanced AMT will hit upper middle-income taxpayers the hardest – 98 percent of those with adjusted gross income between $200,000 and $500,000 will pay an average of almost $11,000 in AMT on top of their regular tax liability.

With our political class, failure is always an option. 


David Henderson, When Taxes are Cut, What Does Regressive Mean?:

The bottom line is this: Start with any system of progressive taxation, cut everyone’s taxes by the same percent, and you will have implemented, by their standard, a regressive tax cut.

Exactly.  If you only tax rich people, any tax cut “disproportionately benefits the rich.”

Greg MankiwMake Your Own Deficit-Reduction Plan, links to a Wall Street Journal’s interactive graphic featuring deficit reduction options.

Janet Novack, Gucci Match: Fiscal Cliff Tax Fight Pits The 2% Against The 0.1% And The Richest 400

Anthony Nitti,   Here’s Your Update On The Fiscal Cliff Negotiations: Both Parties Agree That the Other Party’s Proposal Stinks.  This time, they’re both right.


Paul Neiffer,   Watch Your Timing On Year-End Gifts 

Brian Strahle, D.C. Ruling Presents Franchise Tax Opportunity

Jack Townsend, I Should At Least Mention Stolen Identity Refund Fraud

To dream the impossible dream… Musical theater maven Robert D. Flach tilts at a windmill:

I have a dream that our elected officials in Washington can create a simple and fair Tax Code.
I have a dream that our elected officials in Washington are really not just self-centered and self-absorbed idiots.

That’s right up there with my dream of winning the Triple Crown. As a horse.

No, we’ve been trying that for a long time here.  Can tax on witch-doctors cure Swaziland’s fiscal pain? (Nanette Byrnes, Tax Break)

That’ll work:  Alan Simpson goes ‘Gangnam Style’ in deficit reduction video effort  (Kay Bell)

Sacre Bleu!  Gerard Depardieu Leaves France After Tax Increases (Joseph Henchman, Tax Policy Blog)

Robert Goulder,  Timeless Tax Policy & The Other Colbert (

It might someday help him clear the AGI floor for health cost deductions:  Law Student Wins Krispy Kreme Doughnuts for a Year and Wonders: What Are the Tax Consequences? (Tax Prof)


Tax Roundup, 11/20/2012: Obamacare guidance high on IRS to-do list. Plus: Grover takes hostages!

Tuesday, November 20th, 2012 by Joe Kristan

Obamacare rules prominent in IRS plans for new guidance.  The Treasury and IRS have released their “Priority Guidance Plan” for the current fiscal year.  Tax Analysts reports ($link)

The plan contains 18 healthcare-reform-related projects that will likely take up a considerable portion of Treasury and the IRS’s time. Some time-consuming, tax-related portions of that law, such as the net investment income tax, the excise tax on some medical devices, and the indoor tanning tax, become effective on January 1.

Actually, the tanning tax has been in effect since 2009.  The Section 1411 tax on investment income is a huge tax planning issue.  Three years after the enactment of Obamacare, many basic questions about the tax remain unanswered, including:

  • Will “self-charged” rental income that is non-passive under the passive loss rules be subject to the 3.8% tax?
  • Will rental income earned by “materially participating real estate professionals” be subject to the tax as rent, or exempted as business income?
  • Will pass-through interest earned by S corproation banks be interest, subject to the tax, or business income exempt from the tax for materially-participating shareholders?
  • Will farmers be taxed at the 3.8% on CRP and crop share income?

We should expect at least a set of temporary regulations next month.


Norquist: some Democratic senators will rebel against letting high-income tax cuts expire.  From The Hill:

Conservative anti-tax advocate Grover Norquist says the 20 Senate Democrats facing re-election in 2014 will be the “hostages” who will ensure that President Obama does not raise the Bush-era tax rates.

That isn’t the party line, as Democrats have said they would go over the fiscal cliff before letting “the rich” keep current tax rates.  Grover thinks not:

But Norquist thinks vulnerable senators up for re-election in two years will force Democrats to back down, as they did in 2010 by extending virtually all of the Bush tax cuts for two years.

 “Last time Republicans won the House and [were] a little strengthened in the Senate and Obama folded completely. We’re going to be stronger this time than after last time; our hostages are the 20 Democrats up in ’14.

Grover is an astute observer, but President Obama may play the role of Russian special forces in this hostage drama, ensuring destruction all around.


Patrick Temple-West,   Investors rush to beat threat of higher taxes, and more (Tax Break)

Paul Neiffer,   Talk Brewing of Extending the Payroll Tax Cut.  That would be news, as this had not been part of the year-end tax legislation discussion.  It seems unwise to accelerate the demise of social security by reducing funding, but wisdom isn’t found much in our political class.

William Perez,   Possible Delay to Filing Season Due to Late-Passing Legislation, IRS Warns.  Nice way of saying “we’re doomed.”


Nick Kasprak,  Monday Map: Dividend Income by State:

Iowa ranks a lowly 43rd in percentage of gross income made up of dividends.


Peter Reilly,   IRS Position On Wandry Decision Makes 2012 Gifting More Difficult.  With free Dr. Who references!

Seems unwise.   Paying more in taxes to burnish EPS  (Nanette Byrnes, Tax Break)

That might explain why we’re still working.  Most of us who plan to retire aren’t yet financially ready for it (Kay Bell)


Ex-lineman suspended from life for 28 months.  While everyone who goes through big-time college football programs can claim some level of higher education, it doesn’t always do a lot of good.  A case in point:

Former Syracuse University lineman Louis Gachelin has been sentenced to 28 months in federal prison in an undercover FBI tax fraud investigation.

The U.S. Attorney’s Office reports that the 31-year-old Gachelin was sentenced Monday. He pleaded guilty in July to theft of government money and identity theft.

It apparently doesn’t go better for players in “skill” positions.  The same report says two former NFL players, including a running back,  have pleaded guilty in related cases out of an FBI sting using an “undercover check cashing store in North Miami” to catch identity thieves.



Tax Roundup, 10/16/2012: A rate-cutting tax reform for Iowa? Also: tax season is now really over.

Tuesday, October 16th, 2012 by Joe Kristan

Iowa’s Governor Branstad seems to be serious about this tax reform thing.  From

Gov. Terry Branstad cautioned lawmakers against finding ways to spend the state’s projected budget surplus, while calling Monday for across-the-board tax changes.

Speaking at a Statehouse news conference, Branstad said he’s working on a tax reform proposal to “dramatically” cut personal, corporate and property taxes in the state.

Specifics would be announced later, he said, possibly when he delivers the Condition of the State speech next year.

An automotive representation of Iowa’s income tax.

Iowa’s basic tax system is little changed structurally from the one we had when the Governor took office the first time in 1983.  Substituting rate schedules, you could almost prepare a 2011 Iowa 1040 on 1984 forms.   You wouldn’t even have to substitute the rate schedule to prepare a corporate return; Iowa’s highest-in-the-nation corporation rate is unchanged since 1981.

While the basic structure is unchanged, the system has become infested with special interest deductions and credits over the years — a process that started under Governor Branstad and that got out of control during the 12-year interregnum between his fourth and fifth terms.

In some ways tax reform would be a reversal of course for the Governor.  He has continued the process of complicating the Iowa tax law with special breaks since his return, enacting new carve-outs for ESOPs and proposing special rules for “anchor manufacturers” while making a massive tax credit allocation to the new Southeast Iowa fertilizer plant.

But Governor Branstad also has some history as a tax cutter.   He signed a big rate cut that took effect in 1987, reducing Iowa’s highest individual tax rate from an insane 13% to a still painful 9.98%.  Yet that cut left the basic Iowa structure — including the individual deduction for federal income taxes — untouched.  When he made the huge allocation to the Orascom plant, he was at least embarrassed enough to say that it was an argument for corporate tax reform.

So will the Governor go big?  Will he embrace important elements of the Tax Update’s Quick and Dirty Iowa Tax Teform Plan, which would eliminate Iowa’s corporation tax and cut individual rates to around 4%, while sweeping away the federal income tax deduction and all special carve-outs?  Stay tuned.

Related: Tax Foundation 2013 State Business Tax Climate Index


Brutal Assault on Reason Watch: 

CRFB:  Repealing Deductions Could Lead to 30% Tax Rate Cut (Not Merely 20% Claimed by Romney) and Obama’s $49 Billion Tax Increase on Small Business in 2013 (TaxProf)

What the Joint Tax Committee Really Said About Tax Reform (Howard Gleckman, TaxVox)

Because Doug Shulman’s IRS would rather spend its resources licensing preparers than giving tax refunds to struggling businesses: DELAYS IN PROCESSING NET OPERATING LOSS CASES RESULTED IN MILLIONS OF DOLLARS IN UNNECESSARY INTEREST PAYMENTS (TIGTA report)

Anthony Nitti,  Can A Shareholder Own Corporate Goodwill?

Jana Luttenegger,  Basics of Estate Tax and Gift Tax (Davis Brown Tax Law Blog)

Peter ReillyDon’t Freak Out If You Hear Your Trust Is Defective

Trish McIntire,  98 Days and Counting.  98 days for 2012 tax planning.

News you can use:  I GIVE UP!  (Robert D. Flach) “The members of Congress are idiots.  More so now than ever before in our history.”

The Critical Question:  When it comes to auditing, just what does familiarity breed? (Nanette Byrnes)

Paul Neiffer,  Another Tax Season Bites The Dust

Mothers, hide your children.   Tax Professionals To Be Released Into the Wild Later Today (Going Concern). Oops, too late, that happened yesterday.

Oh, and happy Bosses Day.



Tax Roundup, 9/28/2012: If you want to cheat on payroll taxes, get a government job. Plus: tax credits provide a man long-term housing!

Friday, September 28th, 2012 by Joe Kristan

A little personal liability for the unpaid taxes would get the point across.  The TaxProf passes on this nugget from the Treasury Inspector General for Tax Administration:

Federal agencies are exempt from paying Federal income taxes; however, they are not exempt from meeting their employment tax deposits and related reporting requirements. As of December 31, 2011, 70 Federal agencies with 126 delinquent tax accounts owed approximately $14 million in unpaid taxes. In addition, 18 Federal agencies had not filed or were delinquent in filing 39 employment tax returns. Federal agencies should be held to the same filing and paying standards as all American taxpayers.

When private or non-profit employers fail to remit payroll taxes, the IRS can impose personal liability on the “responsible persons” who fail to see that the taxes are paid.   The IRS can go after anyone from executives to bookkeepers to collect the unpaid tax.  It appears from the TIGTA report (page 2) that the IRS can’t or won’t apply this when government agencies are involved.   Another triumph of fairness from Doug Shulman’s IRS.  The TIGTA report recommends steps to address the problem, but tar and feathers would be a good start.


Contrast the IRS delinquent tax approach to other agencies with this:

Massachusetts Tax Fraud Promoter Sentenced to Prison for Conspiracy to Obstruct and Impede the IRS

A federal judge in Worcester, Mass., sentenced William Scott Dion today to 84 months in prison for conspiring to defraud the United States, and for obstructing the Internal Revenue Service (IRS), the Justice Department and IRS announced. U.S. District Judge F. Dennis Saylor also ordered Dion to pay restitution in the amount of $3 million. 

According to the evidence presented at trial, Dion, Floyd and Adams ran a payroll tax scheme in order to pay employees “under the table” without properly accounting for, withholding, and paying over to the IRS the payroll taxes required by law.

So a private sector actor gets seven years in the big house for scamming payroll taxes.   When a government agency budgeteer does it… nothing.

Other coverage: Kay Bell,  Uncle Sam owes himself $14 million in unpaid federal agency taxes


Think of it as a high-income housing tax credit.   Developer Gets 11 1/2 Years in Bank, Tax Fraud Scheme (

Eric Menden, the former owner of the Wainwright building and the old James Madison Hotel downtown, was sentenced Wednesday to 11-1/2 years in federal prison after admitting to his role in two fraud schemes that grossed more than $40 million.

Menden, 53, of Chesapeake, pleaded guilty to charges of bank and wire fraud and making false statements. He admitted his role in scamming the state and federal government’s historic tax credit program and to defrauding Bank of the Commonwealth out of tens of millions in a loan scheme.

Even when outright theft isn’t involved, “targeted tax credits” are normally a disreputable transfer from the taxpayers to the well-connected.


Howard Gleckman, A Modest Proposal: Five Ways to Tax the 47 Percent (TaxVox). I know he’s trying to show how outrageous it is to try to broaden the income tax base, but his first suggestion — repealing the Earned Income Tax Credit and the Child Tax Credit — is probably a good idea, and it would save the government billions of dollars in fraud losses.

In any case, if spending is not cut, the “47 percent” are going to see a tax increase, probably in the form of a Value Added Tax.  The “rich” simply don’t have enough money to cover the government’s incontinent spending, even if you took all their income.


Tax Policy Blog chart of the day:


Jack Townsend,  Former IRS Agent Charged with Conflict of Interest and Disclosing Return Information Including Whistleblower Name

Janet Novack,  Former IRS Examiner Charged With Leaking Whistleblower’s Name To Big Bank Target

Trish McIntire,  Livestock Deferment Extended

Russ Fox,   California Musings

Jim Maule, Taxes and Services

No kidding.   Corporate tax avoidance subsides when IRS audit threat increases, study finds (Nanette Byrnes, Tax Break)  Next thing you know, a study will show that motorists slow down when they see a state trooper running radar up ahead.

News you can use:  Cigarette Smuggling Can Make You $4 Million Dollars Richer  (Scott Drenkard, Tax Policy Blog)


Tax Roundup, 9/24/2012: Mitt files! And USA bucks trend of lower corporate rates.

Monday, September 24th, 2012 by Joe Kristan

Mitt Romney filed his extended return on Friday. In addition to remininding us laggards that the extension season will end three weeks from today, it shows us that the Republican nominee has a lot of money.  Who knew?

The strangest item may the candidate’s voluntary walking away from a charitable contribution deduction.   He did that to ensure the “effective rate” on his adjusted gross income  was at least 13%.  Of course, he has three years to change his mind and amend his return.

The return has one thing in common with the Obama 1040s: self-employment income.   While the Obamas began taking retirement plan contributions based on that income, perhaps because they secretly read the Tax Update, the Romneys do not.  They could still set up a SEP plan, amend their returns, and take a 2011 deduction against his director fee income.  They may be too busy for that right now,  but if you have an extended return with self-employment income, it’s not too late for you!

The campaign also issued a letter from PWC summarizing his taxes over the past 20 years, debunking the foolish innuendo that Harry Reid peddled that Romney had zero-tax years.

The TaxProf has a Romney return roundup.  More coverage:

Going Concern:  Mitt Romney’s 2011 Tax Returns Reveal He’s the Richest Unemployed Dude You’ve Ever Seen and Footnotes: Romney Tax Returns, Romney Tax Returns and Romney Tax Returns.

Kay Bell,  Romney will file an amended 2011 tax return on Nov. 7 … if he loses

Anthony Nitti,  Reactions to Romney’s 2011 Tax Return and Romney Forgoes Full Charity Tax Break for 13% 2011 Rate

Janet Novack,  On 2011 Federal Income Tax Return, The Romneys Decide Horse Losses Are Personal and Romney Paid At 14% Federal Tax Rate In 2011, Pegs 20 Year Average At 20%

Peter Reilly,  Romney Accountant’s Letter – Exercise In Obfuscation ? and Mitt Romney Passing On Nearly Two Million In Charity – Stupidest Thing I Ever Heard


Related: TaxGrrrl, Ryan’s Amended Returns Offer More Questions Than Answers



Meanwhile, in news that matters:  Sweden to Lower their Corporate Rate to 22 Percent, 18 Points below Ours (William McBride, Tax Policy Blog).


More coverage of the Iowa guy who filed as a South Dakota resident:  Linda Beale, Tax Home–where the heart is, but not necessarily where the taxes are lowest and Russ Fox,  Home Is Where the Family Is.


Jack Townsend,  Restitution in Tax Cases

Jason Dinesen,  “Consumer Reports” Highlights Identity Theft

Jim Maule,  Raising the Tax Shame Noise Level

Nanette Byrnes, Essential reading: GOP retreat on taxes likely if Obama wins, and more

Martin Sullivan,  The Critical Question. “If the Obama wins, will the Republicans comrpomise or double down?” Maybe we should ask the Ben Bernanke.

Russ Fox,  Las Vegas Attorney Accused of Tax Evasion and Structuring

And it wouldn’t be a weekend without a new Buzz from Robert D. Flach.


Quote of the day:

Wind energy tax credits, like all government-sponsored tax incentives, don’t work. They violate every principle of sound tax policy. The wind tax incentives place the risks on the public and promise the rewards to a chosen few. As the insurance company ad said, even a caveman could see that. Nevertheless, there is a bipartisan crescendo building to ensure the wind energy suppliers continue to receive their credits.  (David Brunori, Tax Analysts (subscriber link))


Tax Roundup, 7/10/2012: A truly Rich expatriate; the tax effects of executive politics; just park it by the pole.

Tuesday, July 10th, 2012 by Joe Kristan

Lynnley Browning at Reuters reports that “Denise Rich Renounces U.S. Citizenship, Will Save Tens Of Millions In Tax Dollars,”  prompting millions to wonder, who is Denise Rich?  Celine Dion fans (I’ve never met one, but I know they are out there) will know her as the songwriter behind Celine’s “Love is On the Way,” but political junkies know her as the wife of Marc Rich, the former fugitive billionaire who stopped running when Denise pulled enough strings and spread enough cash around to get him a pardon at the end of the Clinton administration.

Her move prompted some folks to tell her not to let the door hit her on the way out, and perhaps anybody who enables Celine Dion deserves a little venom.  But we should ponder for a moment why money is fleeing the country like deposits fleeing a Greek bank.  Mark Steyn tells us why celebrating her departure is unseemly:

… all this “what sort of red-blooded American renounces her citizenship over tax?” stuff is a wee bit much. It is the Government of the United States, uniquely in the civilized world, that binds citizenship to tax. An American who falls in love with an Uzbek or takes a job helping starving Third World children in Southern Sudan remains liable for US taxation and has to file US paperwork that is, in fact, more onerous than that required of US residents, and is about to get more so…

Most countries tax you if you live within their borders, some tax you if you live elsewhere but earn money within their jurisdiction, but only America claims the right to tax you simply for being American – even if you, say, live in Belgium but drive over the border to work in Luxembourg every day. This is unique to the United States: Spain taxes you if you’re a resident of Spain, Slovenia taxes you if you’re a resident of Slovenia, but America taxes you if you’re an American who’s working as a teacher in Gabon. You’re at permanent risk of double-taxation, and the fines for minor and accidental infraction are arbitrary and confiscatory.

As I say, no other developed country does this – although Eritrea does.

On January 1st 2013, all this gets worse. The FATCAT act (technically, it’s FATCA, but we all get the acronymic message) makes it not worth a foreign bank’s while to do business with Americans. I don’t just mean Mitt Romney’s chums in the Cayman Islands, but an American of modest means on a two-year secondment to Hong Kong requiring a small checking account with which to pay local utility bills – or a small businessman attempting to expand his distribution in Canada.

IRS Commissioner Shulman’s shoot-the-jaywalkers approach to offshore tax compliance, combined with half-baked populist legislation against “the rich” that punishes Americans abroad and businesses for committing everyday finance, is quietly bleeding our economy with a thousand little cuts.  Fabulously-wealthy people like Denise Rich can take a hike, but most of us are stuck here.  We can berate her as “unpatriotic” for leaving, but when you get that $10,000 fine for being one-day late in reporting that bank account you inherited from Uncle Hans in the old country, she’ll have the last laugh.

The TaxProf has moreUpdate: Matt Welch on the Dark Side of Anti-”Swiss Bank Account” Politics”

But we can still move within the country:  Did a Maryland Tax Increase Cause Taxpayers to Flee the State?  (Russ Fox)

Nanette Byrnes: Study: Companies of Republican CEOs pay more tax than Democrats’ (Tax Break).  Why?  One theory is that Democratic CEOs would tend to be in industries that play the government for tax breaks, like low-income housing and renewable fuels, and that Democrats are more comfortable with politicians playing God with the economy.  Unfortunately, the desire  to meddle with the economy via tax breaks is one thing both parties can agree on.

But we knew that before it become official: It’s Official: Tax Gridlock Until After November Election (Janet Novack)

William Perez, Tax Reform Proposal from the Bipartisan Policy Center

Blaming the accountant: Rihanna Files Suit, Alleges Financial Mismanagement Resulted in Tax Audit (TaxGrrrl)

Anybody could lose track of $800,000 in singles.  Take this hard-working Ohio attorney described by

Sparta attorney Meredith “Larry” Lawrence will be sentenced in October on federal tax evasion charges for failing to report income from various sources – including Racers Gentleman’s Club in Sparta.

A jury found him guilty Friday on three counts of filing a false tax return for three consecutive years, starting in 2005.

Attorney by day, strip club operator by night?  “Gentlemen’s clubs” tend to be open late.  Maybe he was just sleep deprived?

During the two week trial, Assistant U.S. Attorney Elaine Leonhard described how federal agents found $800,000 in Lawrence’s safety deposit boxes.

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

“Parking fee?” Yes, the glamor has truly gone out of show business.