Posts Tagged ‘News from the Profession’

Tax Roundup, 2/5/16: The IRS isn’t a bank, and a 1099 isn’t what makes income taxable. And: oil companies, money trees.

Friday, February 5th, 2016 by Joe Kristan

20151217-1Nice Try. The tax law discourages taxpayers from tapping retirement savings too early with a 10% early withdrawal tax. The tax law also allows an above-the-line deduction for penalties imposed by banks for closing out a CD or savings account before maturity.

They aren’t the same thing.

A Mr. Martin learned that lesson this week in Tax Court. He was 54 years old when he pulled out $55,976.29 from his IRA. He reported the 10% penalty tax, but then he also deducted it on line 30 of his 1040 as a “penalty on early withdrawal of savings.”

I can see the logic, as it does look like, well, a penalty on an early withdrawal of savings. But that’s not how the Tax Court sees it (my emphasis):

Martin argues that the additional tax imposed by section 72(t) is deductible under section 62(a)(9). We disagree. Section 62(a)(9) provides a deduction for an amount “forfeited to a bank, mutual savings bank, savings and loan association, building and loan association, cooperative bank or homestead association as a penalty for premature withdrawal of funds from a time savings account, certificate of deposit, or similar class of deposit.” The section 72(t) additional tax is payable to the federal government, not to a “bank” or similar institution listed in section 62(a)(9). Therefore, it is not deductible under section 62(a)(9). Further, the additional tax imposed by section 72(t) is a federal-income tax. Section 275(a)(1) disallows any deductions for “Federal income taxes” (A deduction for certain other taxes, including State income taxes and some other federal taxes, is allowed by section 164(a).).

There was one other problem with the return. He won $1,000 at a casino, an amount arguably below the threshold for which casinos most report gambling winnings on a W2-G. They reported it anyway. Again, the Tax Court:

The casino reported on an information return its $1,000 payment to Martin. Martin argues that, because he earned entries into the lottery by playing slot machines, his gambling winnings should be subject to the $1,200 reporting threshold. Thus, Martin argues, the casino should not have reported the gambling  winnings of $1,000 because the payment fell below the $1,200 reporting-requirement threshold for gambling winnings from slot machines.

Martin assumes that gambling winnings that are not reportable on information returns are not includible in gross income. At trial he said that the IRS is “trying to separate the taxation from the reporting when it is undeniably one and the same”. Martin does not see, or refuses to see, the distinction between information-reporting requirements and the imposition of income tax. Whether the casino was required to report Martin’s winnings is irrelevant to the question of whether his winnings are includible in his gross income. The Internal Revenue Code does not exclude a payment from income when the payment is not large enough to require the payor to report the payment on an information return.

A lot of people think that when something doesn’t show up on an information return, it’s tax-free. It just doesn’t work that way.

Cite: Martin, T.C. Memo. 2016-15

 

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Obama seeks oil tax, destruction of self-driving car industryCNBC reports:

President Barack Obama will propose a $10-per-barrel charge on oil to fund clean transportation projects as part of his final budget request next week, the White House said Thursday.

Oil companies would pay the fee, which would be gradually introduced over five years. The government would use the revenue to help fund high-speed railways, autonomous cars and other travel systems, aiming to reduce emissions from the nation’s transportation system.

“Oil companies would pay the fee.” Such a kidder, that President. Apparently the oil companies will pay it by planting more carbon-absorbing money trees out behind their refineries.

It’s a credit to misguided persistence that the President is still pursuing high-speed passenger rail, an idea that California is busy proving once again to be ridiculously expensive and impractical. And somehow I’d feel much safer in an autonomous car from Google or Apple than one from the the same government that brings us the IRS.

 

Scott Hodge, New IRS Data: Wealthy Paid 55 Percent of Income Taxes in 2014 (Tax Policy Blog).

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“So while many politicians may argue that the wealthy don’t pay their fair share of income taxes, the data simply does not support that opinion.”

 

Russ Fox, Maryland Suspends Processing Tax Returns from 23 Liberty Tax Service Locations:

For consumers, the advice that Maryland noted in their press release is accurate: “Taxpayers should carefully review their returns for these issues and should be suspicious if a preparer: deducts fees from the taxpayer’s refund to be deposited into the tax preparer’s account; does not sign the tax return; or fails to include the Preparer Taxpayer Identification number “PTIN” on the return.” I’ll add, if you don’t own a business and see business income on your return, there’s a problem.

Indeed.

Kay Bell, Lesson from IRS hardware failure: Be prepared for the unexpected during tax filing season. The hardware went back on line yesterday afternoon. 

TaxGrrrl, Update: IRS Website Back Online, Tax Refunds Unaffected

Peter ReillyIRS And The Tea Party – Scandal Enters A New Millennium. Peter observes The TaxProf’s Day 1000 Tea Party Scandal entry.

Keith Fogg, Discharging Late Filed Returns – A Novel but Unsuccessful Approach. “The case shows the creativity that can come into play in the face of very long odds.”

Robert Wood, Bank Julius Baer Hit With $547M Criminal Tax Evasion Penalty, Two Bankers Plead Guilty

 

Me, Tax credits for a few vs. business deductions for everyone. I take my battle against cronyism and for conforming Iowa tax law to 2015 federal changes to IowaBiz.com, the Des Moines Business Record Business Professional’s Blog.

 

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TaxProf, The IRS Scandal, Day 1,002. Another supposedly-erased hard drive sought by investigators miraculously reappears.

Megan McArdle, Obamacare’s Cadillac Tax Will Not Survive. The way pieces of the machine keep falling off, you might wonder if it wasn’t very well designed.

Renu Zaretsky, A Budget, Capital, Growth, and TransparencyToday’s TaxVox news roundup covers the Obama oil fee, last night’s Sanders-Clinton debate, and lots more.

News from the Profession. Lying About Your Financial Statements Being Audited Still Frowned Upon (Caleb Newquist, Going Concern).

 

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Tax Roundup, 2/3/2016: Should tax pros cheer tax complexity? And: 1000 Days of TaxProf scandal coverage.

Wednesday, February 3rd, 2016 by Joe Kristan
Remember, nobody else at the firm ever agrees with me.

Remember, nobody else at the firm ever agrees with me.

Am I more important than you? Yesterday’s post, where I left enough clues to enable people to determine which (losing) candidate I supported at the Iowa Caucuses, provoked this comment:

You voted for Rand Paul? Rand Paul who wants to pass a flat tax and put all the tax professionals out of business?

It’s a statement that verifies the darkest suspicions one might have of the tax profession.  Unless, of course, the commenter, who has “CPA” on his post name, is being sarcastic.

There is certainly a case to be made that an income tax like the one we have is the best way to raise revenue. You could make an honest case also that it is wise to use the tax law to achieve non-tax social goals. While I would disagree, such arguments have a long tradition and reasonable intellectual underpinnings. There’s an argument that in a complex economy, we should expect a complex tax system, and the need to hire tax professionals is a collateral cost to achieve a greater benefit.

But that’s not what the commenter is saying. He is saying that ensuring the ability of tax professionals to make a living off the tax system should be a policy goal. If he means more, he leaves it out; that’s the entire comment.

Sometimes taking an argument to its logical conclusion helps shed light on a system. What if we could magically create a tax system that would grow the economy by a million extra well-paying jobs a year, but was so easy to administer and comply with that it would eliminate the jobs of all 674,686 IRS- registered tax professionals? Oh, and it would cure cancer, too. An objective observer would choose the magical system, and would rightly regard any tax preparer who fought against it to preserve his own job as a monster.

The interest of tax preparers, while obviously important to me, can never be the primary concern of tax policy. Otherwise you would argue for ever-more complex taxes and ever-higher rates to make it harder to do without us. Considering the embarrassment of riches our current tax system offers to those of us who feast on complexity, arguing for more is both unconscionable and redundant.

That gets me back to Mr. Paul, who, according to my Twitter feed, will leave the race today. His tax proposal is a version of a consumption tax that, according to the Tax Foundation’s dynamic projections, would both reduce the budget deficit and grow the economy. It is the only plan that would do both. In contrast, the Bernie Sanders plan would do awful things to the economy, but it would sure make tax preparers more valuable. While people I respect support Sanders for reasons I find incomprehensible, none of them do so to make a living off of forced extractions from others.taxplanchart

Everybody who does tax for a living does so knowing that a stroke of the pen could put us out of business. My dentist taunted me with this observation before I even started my first tax job. I have always set my lifestyle and expectations accordingly. While I’ve made a living off the tax law, the world certainly doesn’t owe it to me, or to anyone else.

 

Kyle Pomerleau, Scott Greenberg, How Danish is Bernie Sanders’s Tax Plan? (Tax Policy Blog):

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But it would be great for tax pros!

 

TaxProf, The IRS Scandal, Day 1,000. Thanks to Paul Caron for his persistence in paying attention to the past and continuing IRS abuse of power.

William Perez, 8 Reasons to Ask the IRS for a Tax Extension. Always better to extend than amend.

Peter Reilly, Tax Dependency Exemptions For Noncustodial Parents – It Is All About Form 8332

Robert Wood, Winner Of $1.6 Billion Powerball Jackpot Sued By Prisoner

TaxGrrrl, Congressman’s Son Sentenced To Five Years In Prison On Fraud & Tax Charges. Maybe he’ll meet a Powerball winner.

 

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David Brunori, Paying for Past Sins (Tax Analysts Blog) “The Jindal administration pushed tax cuts without paying for them. It then tried to address the ensuing budget problems with a barrage of gimmicks. For that, the citizens of Louisiana are likely to pay a price.”

Jeremy Scott, Ted Cruz’s Iowa Win Not a Victory for a VAT (Tax Analysts Blog). “Cruz may have a radical tax program, but it hasn’t been a big piece of his campaign.”

Renu Zaretsky, What’s so funny about taxes, love, and solidarity? “Would Americans pay higher taxes with as much love and solidarity for the people of Flint as they donate water? And would my fellow Michigan neighbors pay up, given that state government appointees and representatives caused the problem and then covered it up?” Not to mention the local one-party regime that triggered the crisis in the first place.

News from the Profession. Take the Going Concern Reader Survey (Going Concern).

Kay Bell, North Pole decides to tax marijuana. Maybe that’s why Santa is so jolly.

 

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Tax Roundup, 1/29/16: Iowa House passes $500,000 Section 179, but prospects bleak in Senate. And: Iowa may give guy a break.

Friday, January 29th, 2016 by Joe Kristan

Accounting Today visitors: Click here to go directly to the newsletter link on cheaper returns.

coupling20160129Accelerating to a stop. When a household is short of cash, the family usually spends less. Iowa has a different approach. They pick your pocket.

The Iowa House of Representatives yesterday voted 82-14 to retroactively couple with all of the 2015 federal tax law changes except bonus depreciation (HF 2092, formerly HSB 535). This would allow Iowa businesses to deduct up to $500,000 in annual purchases of otherwise-depreciable fixed assets under Section 179. Governor Branstad’s budget would limit the deduction to $25,000 — an unexpected departure from Iowa law for the past several years and a significant tax increase.

You would think that an overwhelming bipartisan vote in favor of the $500,000 version would foreshadow quick passage by the Senate. Alas, no.

I talked to some legislators yesterday when I participated in the Iowa Society of CPAs annual Day on the Hill. It appears that Governor Branstad and Senate Majority Leader Gronstal have a little bipartisan deal of their own to kill Section 179 coupling.

That’s not how Sen. Gronstal explains it. From the Quad City Times:

Senate Majority Leader Mike Gronstal, D-Council Bluffs, said his majority caucus would consider what the House passed, but he expressed doubt about moving ahead with a concept at variance with the governor given a similar course of action last session for education funded ended with a gubernatorial veto.

“I don’t like doing things that I know will get a certain veto,” Gronstal said. “That doesn’t seem to me to make a lot of sense. The governor doesn’t have this in his budget.”

I came away understanding that the voice of the majority caucus is really the voice of Sen. Gronstal, and that Section 179 coupling will never come up for a vote in the Senate. I assume it is because both the Governor and the Majority Leader want the money for their own priorities: more cronyist tax credits for Gov. Branstad, and more spending for Sen. Gronstal.

That’s a crummy deal for the thousands of small businesses that suddenly will see a big unanticipated tax increase. It also seems like a deal that would be vulnerable to an insiders vs. Main Street challenge. The tax credits that the Governor wants to fund go to a narrow set of taxpayers. For example, in 2014 $42.1 million of refundable research credits went to 16 big taxpayers. That’s almost enough to pay for half of Section 179 coupling $90 million cost by itself.

Here is the complete menu of incentive and economic development tax credits in the Governor’s budget:

Iowa credits fy 2017

The refundable sales tax credit goes largely to the big data center companies Facebook, Microsoft and Google. The Enterprise Zone Housing credit and High Quality Jobs credits are big company credits that you have to through the economic development bureaucracy to cash in on. The rest of the credits are mostly for favored industries who get breaks unavailable to the much larger universe of other businesses that have to pay full freight.

It might still be possible to get the Governor and/or the Majority leader to see things differently. That will require taxpayers and practitioners to convince their legislators that small businesses and farmers shouldn’t have to stand in line behind insiders.

It’s not clear to me what form the extension will take under the Governor’s program. I was unable to confirm whether the Senate will skip 2015 conformity entirely, as outlined in Sen. Anderson’s newsletter. I have inquiries in.

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Des Moines Register, Iowa agrees to review man’s $5,000 tax refund request. Some good news in the story we mentioned yesterday of the retired maintenance man who inadvertently conceded to a $5,000 liability he didn’t owe.

 

It’s serious. You know tax season is truly underway when Robert D. Flach posts his last Buzz roundup before disappearing into his hive to make his artisanal hand-crafted 1040s. Im starting to think Robert isn’t Donald Trump’s biggest fan.

TaxGrrrl live-blogged the GOP debate last night. I just did a drive-by, myself. Literally; I drove past the venue on my way home last night. No, I didn’t have it on the radio.

Robert Wood, What To Do If IRS Form 1099 Reports More Than You Received

Peter Reilly, Tax Foundation Analysis Of Sanders Plan Only Shows Downside. On the plus side, you could worry less about your investments, as you wouldn’t have as many.

Jason Dinesen, Having Negative Taxable Income Doesn’t Mean the Government Pays You Extra

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Scott Greenberg, The Sanders Tax Plan Would Make the U.S. Tax Rate on Capital Gains the Highest in the Developed World (Tax Policy Blog).

Renu Zaretsky, No Trump, No Problem. The TaxVox headline roundup today covers Google’s tax travails, “tampon taxes,” and candidate tax plans.

TaxProf, The IRS Scandal, Day 995

News from the Profession. Life at EY Involves Food, Technical Difficulties (Caleb Newquist, Going Concern).

 

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Tax Roundup, 1/28/16: Iowa Governor reportedly opposes 2015 coupling for anything. And: Ethanol execs accused of payroll tax crimes.

Thursday, January 28th, 2016 by Joe Kristan


couplingNo 2015 coupling at all? 
I had been under the impression that Governor Branstad’s budget proposal would not couple Iowa’s tax law for the $500,000 Section 179 limit or bonus depreciation, but would couple otherwise. A newsletter from Northwest Iowa Senate Republican Bill Anderson says I was mistaken:

Last week we learned Governor Branstad’s budget supports updating Iowa tax law to conform with changes in the Internal Revenue Code that resulted from federal legislation enacted during 2015. With three significant exceptions:

1. No tax year 2015 coupling. Meaning most of the changes are effective for federal tax purposes beginning in tax year 2015, the bill will not incorporate recent federal changes until tax year 2016. (Items that may impact you are: deduction for state and local sales taxes, above the line deduction for teacher classroom expenses ($250), above the line deduction for qualified tuition and related expenses, discharge of indebtedness on principal residence excluded from gross income.) The estimated fiscal impact of these changes in total is minimal compared to Section 179.

2. No section 179 expensing for tax year 2015 now or into the future, and

3. No bonus depreciation for now or into the future.

The newsletter also provides some detail of the fiscal impact of coupling:

Estimates project just coupling with Section 179 for one year is an approximate $90 million decrease in FY 2016 budget and a revenue increase in FY 2017 estimated roughly to be more than $20 million

This is a lot of money, but it’s a lot less than the $277.3 million the Governor proposes to spend next year on targeted tax credits. While Section 179 benefits business in every county regardless of whether they hire lobbyists or consultants, the targeted tax credits go to big taxpayers and insiders who know how to work the system. We’ll see which constituency is more important to the General Assembly.

Today is the Iowa Society of CPA’s “Day on the hill.” I will be there pushing for coupling. I will confirm the no-coupling-for 2015 report. I also hope to find out whether Senate Democrats have any interest in Section 179 coupling. The Republican House is expected to pass a bill (HSB 535) with Section 179 coupling (Update, 9:44 am: Full 2015 coupling (except bonus depreciation) passed in the House this morning, 82-14).

Related: Eye on the Legislature 2016.

 

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It’s an awful idea to “borrow” payroll taxes. Iowa Businessmen Indicted for Failing to Pay Employment Taxes (Department of Justice Press Release):

Randy Less, 48, of Hopkinton, Iowa, and Darrell Smith, 59, of Forest City, Iowa, are each charged with multiple counts of willfully failing to truthfully account for, and pay over federal income, social security and Medicare taxes that were withheld from the wages of the employees of Permeate Refining Inc., which was in the business of ethanol production.

According to the allegations in the indictment, Less was the majority owner, a general partner and the general manager of Permeate Refining Inc. in Hopkinton.  In those roles, Less had the responsibility to collect, truthfully account for and pay over to the Internal Revenue Service (IRS) federal income, social security and Medicare taxes withheld from the wages of his employees.  From approximately the fourth quarter of 2009 and continuing through the fourth quarter of 2010, Less is alleged to have willfully failed to pay over to the IRS more than $116,000 in withheld taxes.

The indictment further alleges that a company called Algae Energae purchased an ownership interest in Permeate in September 2009.  After that purchase, it is alleged that Smith, a corporate officer and manager of Algae Energae, also had the responsibility to collect, truthfully account for and pay over to the IRS taxes withheld from the wages of Permeate’s employees.  From approximately the first quarter of 2011 and continuing through the third quarter of 2012, both Less and Smith are alleged to have willfully failed to pay over to the IRS more than $307,000 in withheld taxes.

The IRS has resorted increasingly to criminal charges when payroll taxes go unpaid for a long time. While the defendants in this case are presumed innocent unless and until the IRS proves its case in court, the indictment reminds us that failing to remit payroll taxes is serious business. If you find yourself having to choose who to pay, remember that only the tax man has badges and guns, and that their liability doesn’t go away in bankruptcy.

 

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Robert D. Flach, WHO MUST FILE A 2015 TAX RETURN

TaxGrrrl, ‘Bug’ Exposes Uber Driver’s Tax Info, Including Name and Social Security Number

Kay Bell, Uber oops: driver’s tax info exposed on ride share site

Jack Townsend, More on the U.S. as the World’s Tax Haven

 

David Brunori, Most People Lose When Pols Pick Winners and Losers (Tax Analysts Blog). “Tax systems should have as little impact on economic decision-making as possible.”

TaxProf, The IRS Scandal, Day 994

Alan Cole, New CBO Report Shows Declining Share of C Corporations (Tax Policy Blog):

entity filings chart

Some businesses (but not all businesses, just those with a disfavored legal structure) pay a 35% rate at the entity level, followed by taxes of up to 23.8% at the shareholder level. Others, like partnerships and sole proprietorships, have taxes paid by their owners commensurate with their owners’ income in a single layer of taxation. Of course nobody wants to be a C corporation.

And yet certain politicians tell us that we just need to continue the beatings until corporate morale improves.

Renu Zaretsky, When Sharing is Caring… or Scary. Today’s TaxVox roundup covers candidate tax plans, Google and Facebook taxes, and more.

News from the Profession. I Am a Millennial Accountant, and I Hate Accounting (Chris Hooper, Going Concern)

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Tax Roundup, 1/26/16: Tempt not your tax pro. And: Airbnb, Buzz, and inspiring emails from the boss!

Tuesday, January 26th, 2016 by Joe Kristan

dimeIf only she had taken an IRS-approved ethics continuing education course. Accountant charged in $1M embezzlement case (Herald-Dispatch.com):

HUNTINGTON – A local accountant is charged with 953 criminal counts accusing her of embezzling more than $1 million from at least one client’s account over a five-year period, according to criminal complaints filed by the West Virginia State Police.

Kimberly Dawn Price, 57, of Huntington, was arraigned Friday on 302 counts of embezzlement, 326 counts of forgery, and 325 counts of uttering at Cabell Count Magistrate Court.

There’s so much that has gone wrong here. For example:

According to criminal complaints, Price, while employed as a staff accountant at the Huntington-based firm Hess, Stewart, and Campbell, PLLC, was directly in charge of the account of Elizabeth Caldwell, a Huntington woman who died in the fall of 2015.

That’s a lot of authority for a staff accountant. I don’t understand, though, why anybody would give their outside accountant full access to their checking accounts. Or why any accounting firm would ever want its employees to deal with that sort of temptation. To be sure, the partners may not have known she had the client checkbook.

When hiring a tax pro, you want them to do a good job of preparing your return, helping you comply with the tax law, and getting you refunds when they are due. It’s not their job to spend it for you. They don’t need your checkbook.

 

Let us operate in your town, you’ll be glad you did. Airbnb, the online facilitator of private short-term rentals, not long ago announced that it would work with states and localities to collect lodging taxes. I suspected that they would use the lure of revenue to convince reluctant municipalities to allow them to operate. Yes, there are silly municipalities, like my own West Des Moines, who prevent people from renting their homes out for, say, the Iowa Caucus crowd.

Now Airbnb seems to confirm my suspicions with their new report, AIRBNB: Generating #2 BILLION IN POTENTIAL TAX REVENUE FOR AMERICA’S CITIES.

Just the sort of argument that carries weigh in city halls everywhere.

 

buzz20150827The bees may be quiet for the winter, but Robert D. Flach is Buzzing! Today’s Buzz covers 1095-Cs, retirement savings, state anti-fraud measures, and a certain national tax prep franchise.

Russ Fox, FTB’s New MyFTB Impresses; Will the IRS Take Heed?:

If you’re a tax professional who deals with California clients or a California taxpayer, I urge you to enroll in MyFTB. I’m very impressed. I may rag on the FTB (especially in the enforcement area) but from my point of view MyFTB is a model to be emulated by the rest of the country.

California has made it easier for practitioners to get powers of attorney online.

Robert Wood, Married Filing Joint Tax Returns? IRS Helps Some Couples With Offshore Accounts. “The new rules are a welcome change. But they should still underscore the importance of deciding which disclosure program is right for you.”

Emily CaubleReforming the Non-Disavowal Doctrine (Procedurally Taxing) “I will refer to courts’ resistance to taxpayers’ attempts to invoke substance-over-form as the ‘Non-Disavowal Doctrine.'”

Jason Dinesen, Glossary: 529 Plan. “The term “529 Plan” is a generic name given to tax-advantaged savings accounts for college expenses.”

William Perez, Tips for a Tax-Efficient Divorce, Plus a List of What to Do First

Annette Nellen, Recent Tax Law Change Cautions

Kay Bell, Arizona proposal: a state tax credit for gun classes. Tax credits. Is there anything they can’t do?

 

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Scott Greenberg, How the Tax Code Discourages Investment, in One Statistic (Tax Policy Blog). “The results are disheartening: over time, U.S. corporations will only be able to deduct 87.14 percent of the cost of investments they made in 2012, in present value terms.”

Renu ZaretskyOutlooks, Deficits, Breaks and Moves. Inversions, deficits forever, and state budget battles.

TaxProf, The IRS Scandal, Day 992

Sebastian Johnson, State Rundown 1/25: State of the States (Tax Justice Blog). “Read all about the latest tax debates in West Virginia, Indiana, Kansas, Massachusetts, and North Carolina. Plus a listing with links to State of the State addresses.”

 

News from the Profession. Confidential to a Certain Deloitte CEO: Millennials Don’t Need Any More Emails (Caleb Newquist, Going Concern)

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Tax Roundup, 1/22/16: Tax scams for tax pros. And: How Des Moines got so cool once I moved here.

Friday, January 22nd, 2016 by Joe Kristan

Accounting Today Visitors:  Click here for the post on Popular wisdom and tax rates.

 

Gone Phishing. It’s not just taxpayers that get scam emails. Scammers also aim at tax pros. For example:

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Of course the message is a fake. It was sent by the sketchy-sounding email address “info@tablerockbelize.com” and the link goes to something called “otadealsbox.com/irs.” Nothing good would happen from following that link. Be careful out there.

 

Nicole Kaeding, Map: State-Local Tax Burden Rankings for FY 2012 (Tax Policy Blog):

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While Iowa’s tax burden isn’t that out of line — it’s actually a little better than average — our business tax climate is one of the worst. It’s a result of how poorly designed Iowa’s tax system is. The good news is that there’s a lot of room to improve our tax system without increasing the overall tax burden.

 

Start your weekend right with fresh Buzz! from Robert D. Flach. Today’s links cover lots of ground on early filing, and a good explanation of why the talk of how “IRS now has six years to audit your taxes” isn’t right.

Jason Dinesen, Do I Need Form 1095-C to File My Tax Return? The next question: how many taxpayers even know to expect one?

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William Perez reminds readers to Communicate Effectively with Your Tax Preparer

Annette Nellen, Filing 2015 tax returns – help for practitioners

Kay Bell has 4 filing tips to ensure you get your tax refund ASAP

Robert Wood, What To Do If Form 1099 Reports More To IRS Than You Received

Paul Neiffer, Mr. Market Wants Its Excess Profits Back. “We know what happened after the 1970s and now Mr. Market is now trying to grab those excess profits back from farmers from the ‘ethanol’ boom.”  Of course, aging corn state politicians are fighting back by yelling at clouds.

Jim Maule, Deductions Arising from Constructive Payments. “The Tax Court explained that payment by an S corporation of a shareholder’s personal expense is a constructive distribution. It pointed out that this principle had previously been articulated by the court. Thus, explained the court, ‘It also follows that for purposes of claiming the deduction, the shareholder is treated as constructively paying the obligation.'”

Peter Reilly, Tax Planning In Bernie Sanders Land Would Feel Familiar To Elderly CPAs. Older than me, even.

E. Martin Davidoff, New Format of Notice of Intent to Levy Fails to Provide Sufficient Notice (Procedurally Taxing)

Russ Fox, Fail, Caesar! An Update. Implications for poker pros.

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TaxProf, The IRS Scandal, Day 988. “Tax Agency Erased Hard Drive Despite Litigation Hold.” Don’t try that with your tax records.

Jeremy Scott, Furor Over Extenders and Rising Deficits Disingenuous (Tax Analysts Blog), my emphasis:

So the new CBO report is something of a bitter pill for Obama. But the president isn’t to blame, according to some observers. In fact, the CBO itself points out that about half the cost of rising deficits is from tax legislation enacted since August 2015. The biggest chunk, of course, comes from the extenders compromise, which made some expiring (or expired) tax provisions permanent. That hurts the budget outlook, which always assumed expiring tax provisions would stay expired.

But extenders have never been allowed to stay expired. They are always renewed — sometimes late and sometimes retroactively, but without significant exception. And that makes the CBO’s observations about extenders deceptive. It also highlights why previous CBO projections about the deficit were always too rosy. By assuming that extenders would go away once they expired, budget forecasters were always showing too much revenue. If the CBO had used a model that assumed Congress would continually renew popular provisions like the research credit, the deduction for state and local sales taxes, and bonus depreciation, the numbers would look almost identical to what the January 19 report is showing now.

Exactly. The extenders were an ongoing accounting scam, pretending provisions that were permanent in reality would go away. “By making some extenders permanent, Congress has finally allowed the CBO to paint a more realistic portrait of the federal deficit and the long-term budget outlook.”

Matt Gardner, After Years of Shrinking, Nation’s Deficit Set to Grow in 2016; Recent Tax Cuts a Contributor (Tax Justice Blog)

 

Howard Gleckman, What Are the Consequences of a Financial Transactions Tax? (TaxVox). Aside from moving exchanges offshore, damaging markets, erasing wealth, and making it harder for the little guy to close transactions, it’s a great idea.

 

Joseph Thorndike, Do Progressives Hate Tax Reform? (Tax Analysts Blog):

The Tax Reform Act of 1986 was far from perfect, but it made good on the lower rates/broader base mantra. Almost immediately, however, both parts of the bargain began to fray; rates began creeping up within a few years, and preferences (never vanquished entirely in the first place) also began to grow. By the mid-1990s, tax reform was starting to look like a disappointment, to both liberals and conservatives.

Today, classic tax reform has little real support outside the wonk community. So it’s fair to say, as Holtz-Eakin does repeatedly, that liberals don’t care about tax reform.

But neither do conservatives.

I think that’s always true, in a way. That doesn’t mean it’s not worth doing.

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News from the Profession. Report: CPAs Exaggerate Their Success at the Bar, Pretty Much Everywhere (Caleb Newquist, Going Concern).

Fun link: How America’s Dullest City Got Cool. I think they overstate how much of the revival of Des Moines was planned by anyone, but they are right to point out home much this town has improved since I moved here in 1985 (proving that correlation is definitely not causation). Thanks to @lymanstoneky for the link on Twitter.

 

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Tax Roundup, 1/19/16: Thieves holiday! Filing season underway today.

Tuesday, January 19th, 2016 by Joe Kristan

1040 corner 2015It begins. The official start of filing season is today. That means the IRS will begin processing electronic return filings today. That doesn’t mean all that much.

Well, it means something to the people most eager to file 2015 1040s: the identity thieves. They don’t have to wait on real W-2s and other information returns, most of which don’t have to be provided to recipients before February 1. The thieves like to file right away, before the real taxpayers e-file and block them.

It means something to earned income tax credit fraudsters. Claiming a little qualifying income on a phony schedule C is standard operating practice for EITC scams, and you can file in a hurry when you just are making it up.

For most other taxpayers, the opening of filing season is a non-event. They are still waiting on the W-2s, their 1098s for their home mortgage interest, and their 1099s for interest and dividends. Especially dividends, as the big brokerage houses routinely get extensions for issuing their 1099s, and then issue amended ones anyway. And K-1s for partnerships and S corporations often aren’t even ready by the filing deadline.

The information return wait will be longer for many of us this year. This is the first year many businesses are required to issue 1095-Bs and 1095-Cs to report health care coverage to their employees under the Affordable Care Act. These forms are supposed to enable employees to determine their coverage credits and penalties. When it became clear that many employers would be unable to meet the deadline for completing these complex forms, the IRS rolled back their deadlines. The IRS says employees can file their 1040s using “other information” to compute their ACA taxes and credits, but we don’t know yet if people will try.

Don’t be hasty. It is unwise to try to file returns before you have all of your information returns. Especially don’t try to file using your last pay stub instead of your W-2. You’ll probably get it wrong. Worse, if your employer is participating in a new IRS program where W-2s get a unique anti-theft ID number, you’ll delay your refund.

This convicted ID thief likely was a first-day filer.

This convicted ID thief likely was a first-day filer.

It’s better to extend than amend. Whatever benefit you get from filing your return a little sooner, it is lost if you have to file an amended return for a corrected 1099, or for one you didn’t expect that showed up late.

You can file a FAFSA using estimated amounts. One of the biggest causes for taxpayer impatience is the need for tax return information to complete their “Free Application for Federal Student Aid,” which asks for numbers off the 1040. But the FAFSA allows you to use estimates if you haven’t filed your 1040. If you are awaiting a K-1, you’re better off filing your FAFSA based on an estimate than hounding the tax preparer to file a 1040 with incomplete information.

The system should change. Allowing e-filing before any of the information return deadlines almost seems to be a special IRS fraud-filing feature. Given the identity theft epidemic, it’s irresponsible for IRS to be sending billions to grifters before they can cross check returns against third-party information. The third-party filings should have unique identifiers for taxpayers to use to show that they aren’t ID thieves.

The culture should change. Everybody gets excited about a big refund. That just means you gave the government a big interest free loan. Withholding tables should be modified to not generate big refunds, to reduce the pressure for rapid refunds. Penalty thresholds for underpayment should be lowered so that taxpayers accidentally underwithheld aren’t clobbered. People shouldn’t think it’s good to let the Leviathan have their extra cash.

Related: 

TaxGrrrl, Another State Puts Brakes On Tax Refunds, Citing Concerns About Identity Theft;

Accounting Today, IRS Launches Free File for New Season.

Russ Fox, Same as Last Year Doesn’t Work. “Robert Flach has a post today where he notes the information that’s needed to prepare a tax return. I don’t have much to add to his excellent list (though I do need to see your W-2Gs, too).”

 

Enjoying a short Des Moines winter commute.

Enjoying a short Des Moines winter commute.

Gazette.comGeorgia man linked to 2014 UNI data breach charged with tax fraud:

A Georgia man linked to a University of Northern Iowa data breach in 2014 has been charged with tax fraud in federal court.

Bernard Ogie Oretekor, 45, also known as Emmanuel Libs, was charged last week with theft of government property and aggravated identity theft.

How did a Georgia man from Nigeria get past the IRS? It apparently isn’t too hard:

The California indictment shows Oretekor and his co-defendant sent victim’s “phishing” emails to capture their usernames and account passwords. When victims clicked on the link in the phishing emails it sent them to a fraudulent website and when they logged in their usernames and passwords were captured, which allowed the defendants to access the victims’ accounts.

Be smart. I’ve never seen a real email that requires you to “update your information” for your bank, credit card, etc. Don’t click on links from emails you aren’t expecting, and don’t provide information to them. If you really need to check your information, close the email and go to the actual bank or vendor website directly.

 

Robert D. Flach has a wintry Tuesday Buzz! Bartering, bad taxpayer service, and much more.

William Perez, Can Two Taxpayers Claim Head of Household Status at the Same Address?

Robert Wood, Goldman Sachs’ Historic $5 Billion Settlement Has Silver Lining: Tax Deduction

Kay Bell, Lotteries aren’t budget bonanzas for states

Congratulations to a longtime Iowa Business Blogger. 2016 Brings 10th Anniversary of Rush on Business

 

TaxProf, The IRS Scandal, Day 985

Cara Griffith, Why the Minnesota Tax Court Is Making Me Paranoid:

Here’s my concern: In doing regular research, staff at Tax Analysts realized that the Minnesota Tax Court hadn’t published any new opinions to its website in several months. That is odd, so an inquiry was sent to the court to ask if the location of published opinions had changed or if the court had stopped publishing opinions.

The court responded that its website was under construction and that recent tax court decisions could be found on Westlaw. Eventually it added that a paralegal would attend to the request – next week.

That’s sad and lame. And, as Ms. Griffith points out, Westlaw is expensive. Here in Iowa, the Department of Revenue hasn’t put new rulings online since November 5, and now their new ruling website appears to have blown up. Here’s how it looks this morning:

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Oops.

 

Renu Zaretsky, All’s fair in debates and taxes…. Today’s TaxVox headline roundup covers how taxpayers will feel the Bern, the attempt to subvert Colorado’s taxpayer protections, and much more.

 

News from the Profession. In 2016, The War Rages On for All the Management Accountants (Caleb Newquist, Going Concern).

 

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Tax Roundup, 1/7/16: Taxpayer Advocate report describes IRS “pay to play” plans. And: IRS nixes plan to make charities collect tax ID numbers.

Thursday, January 7th, 2016 by Joe Kristan

20150107-2Have you heard about the IRS “Future State Plan?” Or “CONOPS?” Me neither.

The latest annual Taxpayer Advocate Report to Congress is the first I’ve heard about this mostly-secret IRS initiative. The report explains (my emphasis):

During the past year-and-a-half, the IRS has devoted significant resources to creating a “future state” plan that details how the agency will operate in five years. The plan is explained and developed in a document known as a Concept of Operations (CONOPS). There are many positive components of the plan, including the goal of creating online taxpayer accounts through which taxpayers will be able to obtain information and interact with the IRS.

However, the CONOPS also raise significant questions and concerns. Implicit in the plan — and explicit in internal discussion — is an intention on the part of the IRS to substantially reduce telephone and face-to-face interaction with taxpayers. The IRS is hoping that taxpayer interactions with the IRS through online accounts will address a high percentage of taxpayer needs. It is also developing plans to enable third parties like tax return preparers and tax software companies to do more to assist taxpayers for whom online accounts are insufficient — an approach that will increase compliance costs for millions of taxpayers.

Nina Olson, Taxpayer Advocate

Nina Olson, Taxpayer Advocate

The IRS, as usual, is cooking this all up in secret, with only well-connected insiders in on the plan. Tax Analysts describes the report ($link):

A major concern is the aura of secrecy around the CONOPS documents. Despite the fact that the IRS is conducting internal discussions about its “future state” plans, Olson’s report says the Service has repeatedly declared CONOPS data elements and documents “official use only” and not for public dissemination. “Never before has the IRS made this assertion in so many instances,” the TAS report says. One area where the IRS has shared its CONOPS plans — the Large Business and International Division — caters to a group of taxpayers that can afford to “pay to play,” the TAS said, while future service plans remain under wraps for the roughly 150 million individual taxpayers and 54 million small business taxpayers.

If you look at it from the viewpoint of most taxpayers, this plan seems incomprehensible. But if you believe that the IRS is really trying to serve the interests of the national tax prep franchise outfits, national accounting firms, and the biggest law firms, it completely makes sense.  It actually fits in well with the IRS preparer regulation efforts to eliminate competition for the national tax prep firms — a regulation effort that the Taxpayer Advocate still regrettably and unwisely supports. Those who are drafting the new taxpayer service labyrinth can be expected get nice raises by going out into the tax industry to help their new employers navigate through it.

Related: Leslie Book, The National Taxpayer Releases Annual Report to Congress (Procedurally Taxing); Accounting Today, Taxpayer Advocate Concerned about IRS Plans for ‘Pay to Play’ Taxpayer Service,

 

Another IRS screw-up averted. I just received a Tax Analysts breaking news email saying:

The IRS has withdrawn proposed regulations that would implement the statutory exception to the contemporaneous written acknowledgement requirement for substantiating charitable contribution deductions of $250 or more.

These rules would have required donors to provide charities with their social security numbers — a horrible idea in the identity theft era. Expect the IRS to try to sneak them back in when they think people aren’t looking.

 

Nicole Kaeding, American Migration in 2015 (Tax Policy Blog).
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Four of the ten states with the most inbound migration have no personal income tax. Most of the states where the population is fleeing have very hign income taxes, including Illlinois, Connecticut, New York and New Jersey. To be fair, high-tax Vermont seems to be attracting people, probably from dysfunctional New York.

This won’t help inbound migration. Illinois Announces Plans To Delay Tax Refunds Through March (TaxGrrrl)

Kay Bell, Delayed state tax refunds in Illinois, Louisiana & Utah because of tougher tax identity theft procedures. And because Illinois is broke.

Robert Wood, Obama Executive Action? Tax Hikes Could Be Next. “President Obama has stretched executive authority with immigration and gun law changes. And he is “very interested” in executive action on taxes too.”

Jack Townsend, Government Asserts Wylys’ Fraud in Bankruptcy Court. It’s a multibillion dollar tax case involving offshore trusts and a “blame the tax pro” defense. Mr. Townsend goes deep on the cases being made by both sides.

Paul Neiffer, “BIG” Might Not Be a Problem. Paul discusses the now-permanent five year “recognition period” for S corporation built-in gains.

William Perez lists Tax Deadlines for 2016

Robert D. Flach posts MY ANNUAL POST FOR JOURNALISTS AND BLOGGERS, reminding us all that he doesn’t care for conflating “tax professional” with “CPA.”

Peter Reilly, No Foreign Income Tax Exclusion For Army Civilian In Afghanistan

Tony Nitti, Love In The 21st Century: Bad Breakup Leads To Form 1099, Lawsuit. I’m not a trained relationship professional, but I think its safe to observe that issuing a 1099 to your ex-girlfriend burns all the bridges.

 

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Megan McArdle, Closing Tax ‘Loopholes’ Would Choke the Middle Class. “If you want to pay for any major new program by “closing the loopholes,” it is these loopholes that you will need to close, because the amount of revenue raised by, say, doing away with carried interest treatment of sweat equity partnership stakes works out to a rounding error on the federal budget.”

David Brunori, Taxing Guns Is Just Wrong (Tax Analysts Blog). “The fact is that a gun tax will have no effect on gun violence.”

TaxProf, The IRS Scandal, Day 973. A dispatch from the denialist front.

 

News from the Profession. #BusySeason Has Arrived (Caleb Newquist, Going Concern).

 

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Tax Roundup, 12/23/15: The wisdom, or not, of paying taxes by year-end. And: Deep thoughts at Think Progress.

Wednesday, December 23rd, 2015 by Joe Kristan

dimeIs it wise to prepay deductible taxes? Paying 4th quarter estimated taxes before December 31 is a standard piece of the year-end tax planning toolkit. Sometimes taxpayers go further and pay in December all of their taxes that would be due in the following April. Is it wise to pay all of your taxes 3 1/2 months early to move a deduction up a year?

The first question you have to answer, with regard to payments of state and local taxes deductible on your federal return, is whether you will be paying alternative minimum tax this year or next year. For example, a taxpayer with an unusual lump of income this year who waits until next year to pay state taxes may trigger AMT next year, wasting those state tax deductions. On the other side of the coin, taxpayers who are in AMT this year get no value from prepaying deductible taxes, so they might as well put the money to work until the taxes are due.

If the taxes are just as deductible in either year, it’s a time value of money question. What is the present value of spending a dollar now to get a fraction of that back as a tax benefit a year earlier? I’ve run some numbers, using the top Iowa marginal tax rate and the rates at the different federal brackets:

2015 year-end payments pv2

This shows a benefit at all brackets from prepaying estimates due in January, but prepaying taxes due in April only makes sense at higher brackets, and it never works to prepay September property taxes in the prior year if AMT is not a factor.

This is another installment of our 2015 year-end planning tips series

 

Think Progress is an openly partisan agitation outfit, so we shouldn’t expect it to know much about taxes. Still, it is a regular source of talking points for a certain breed of politicians who promise to spend everything on everyone, all to be paid for by someone else. That makes it worthwhile to occasionally correct it for saying something half-baked like this (my emphasis):

There may be some truth to the, as no one has accused Apple of doing anything illegal. But while Cook has advocated for lowering the corporate tax rate and closing loopholes, corporate taxes are already a shrinking portion of the government’s revenue, getting replaced instead by payroll taxes paid by working people.

Yes, corporate taxes are a shrinking portion of government revenue. But it’s not because the corporate tax law has suddenly become lax. It’s because most businesses are no longer taxable as corporations in the first place.

entity forms chart

Source: Tax Foundation

The 1986 tax reforms made it sensible for most closely-held businesses to be partnerships or S corporations. Unlike C corporations, which pay corporation taxes, these “pass-through entities” don’t pay taxes; instead, the income is reported on their owners’ 1040s.

Think Progress says the C corporation taxes are being replaced by “payroll taxes on working people.” That’s demonstrably wrong. C corporation taxes are being supplanted by business taxes paid on 1040s, which are generally paid at high tax brackets. Perhaps Think Progress has developed a strange new respect for hard-working high-bracket individuals.

Tax foundation Distribution of Federal Taxes in 2014

Chart Courtesy Tax Foundation

Cracking down on C corporations, as Think Progress advocates, will do nothing but confirm the trend away from C corporation taxation. I suppose then they’ll just continue the beatings until morale improves.

Related: Individual Tax Rates Also Impact Business Activity Due to High Number of Pass-Throughs (Scott Hodge, Alex Raut)

 

WOWT.com, Former Omaha IRS Agent Arrested for Tax Fraud Scheme. And yet we are told that these people need to regulate preparers to stop tax fraud.

 

Jared Walczak, States Lag Behind Federal Government on Small Business Expensing (Tax Policy Blog). “Forty-five states and the District of Columbia allow first-year expensing of small business capital investment under Section 179. Of those, thirty-four states are in conformity with the now-permanent $500,000 federal expensing level.”

William Perez, How Do You Claim a Sales Tax Deduction on Your Federal Taxes?

Annette Nellen, Top Ten Items of Tax Policy Interest for 2015 – #3. Thoughts on the Quill decision.

Kay Bell, Home energy tax breaks are extended, just in time for the arrival of, for many, an unusually warm winter

Jack Townsend, U.S. Taxpayer Seeks Declaratory Judgment that Goevernment Must Prove Willfulness for the FBAR Willful Penalty by Clear and Convincing Evidence. Given the stakes, it seems only fair, but the IRS prefers to be able to cause financial ruin with cloudy and unconvincing evidence.

 

20141201-1

 

Jason Dinesen, From the Archives: Taxpayer Identity Theft, Part 2

Jim Maule asks Is the Soda Tax a Revenue Grab or a Worthwhile Health Benefit? I say its a revenue grab combined with moral preening.

Stephen Olsen, Summary Opinions for November (Procedurally Taxing). A roundup of tax procedure headlines.

Robert Wood, 5 Things To Know About Year-End’s Massive Tax Bill

TaxGrrrl, Real Housewife Teresa Giudice Released From Federal Prison

Tony Nitti, Moving? Don’t Forget The Tax Deduction. “At 23 years old I packed up my life, and in a move made popular by members of the witness protection program, fled New Jersey for the quiet of the Colorado mountains.”

Robert D. Flach talks about priorities in A YEAR-END TAX QUESTION FROM A CLIENT

 

Cheer up! Social Security is Still Going Broke (Arnold Kling)

TaxProf, The IRS Scandal, Day 958

Howard Gleckman, Trump Would Slash Taxes for the Top 0.1 Percent By An Average of $1.3 Million, Add Nearly $10 Trillion to the Debt (TaxVox)

 

Thanks a bunch, Prof. Avi-Yonah. CBS News:  Vanguard Investors, Your Fund Fees Could Quadruple If Michigan Tax Prof Reuven Avi-Yonah Is Right (TaxProf). A great example of how with a little corporation-bashing, busybody do-gooders would screw millions of small investors.

 

Holiday Giving News from the Profession. This Flask-Calculator Is the Perfect Gift for the Accountant Who Drinks Everything (Caleb Newquist, Going Concern)

 

 

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Tax Roundup, 12/22/15: If you want a 2015 qualified plan, time to fly! And lots more.

Tuesday, December 22nd, 2015 by Joe Kristan
The view from Tax Update world headquaters yesterday.

The view from Tax Update world headquaters yesterday.

10 days to get a qualified plan in place. Some of the best deductions for sole proprietors and one-owner corporations are found in the tax law’s “qualified plan” rules. A payment to a qualified pension or profit-sharing plan is deductible now, grows tax free, and is only taxable on retirement. For one-employee companies, it’s a deduction for taking money from one pocket and putting it in another.

One of the best of these opportunities is the “Solo 401(k),” which allows a deduction of up to $53,000 for contributions to a solo owner-employee’s retirement plan. But there’s one little catch: the plan has to be in place by December 31 of this year to allow a 2015 deduction.

If that sort of deduction sounds attractive, you should consult a qualified plan professional. Some brokerage houses can steer you the right way, as can the Vanguard mutual fund company.

Remember, though, that once money is in a qualified plan, expect it to stay there. Early withdrawals face a 10% penalty, as well as income tax liability. 401(k) plans generally can’t be investors in or lenders to the plan owner’s business. There are annual compliance costs that inevitably reduce the tax benefits. Still, for an annual deduction that size, some inconvenience can be tolerated.

This is the second installment of our 2015 year-end planning tips series. Collect them all!

 

Kay Bell, Upcoming filing season will start on time: Jan. 19, 2016. Almost none of my clients are ready by then. While I’m glad that the season isn’t delayed by a failure to pass an extender bill, I think identity theft requires a later start to issuing tax refunds. They shouldn’t be processed until W-2 and 1099 information is in the IRS system – preferably with special W-2 codes like those the IRS is experimenting with this season to catch fraudulent claims. 

Of course, that means the government will sit on overpayments longer. That should be addressed by changing the “I got a big refund!” culture. That could be done by lowering to 75% the amount of taxes that have to be paid in by April 15 to avoid a penalty and by changing the withholding tables to make refunds less likely.

 

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Robert D. Flach comes through with a “meaty” Christmas Week Buzz, with lots of Extender bill discussion and a hint of perhaps the most unusual Christmas Eve tradition ever.

Tony Nitti, Top Ten Tax Cases (And Rulings) Of 2015: #4 – Who Can Qualify As A Real Estate Pro?

Russ Fox, Are Tips (Gratuities) at the Poker Table Deductible? “As long as the tip is reasonable, it’s clear that a professional poker player can deduct the tip as a business expense.” You’ll have to read the post to see whether it works for amateurs.

William Perez, All About the Earned Income Tax Credit. “The easiest way to find out if you qualify for the earned income credit is to use an application found on the IRS Web site called the EITC Assistant.”

Andrew Mitchel offers a True / False Quiz on FAST Act Passport Revocation Provisions

Hank Stern, Major O’Care Disappointment (Insureblog). “Now that the (disastrous) first phase of the 2016 Open Enrollment season is behind us, lets’ take a look at what a huge disappointment it was.”

Carlton Smith, Tilden v. Comm’r: Postal Service Tracking Data Determines Timeliness of Tax Court Petition (Procedurally Taxing)

TaxGrrrl, 12 Days Of Charitable Giving 2015: PACT For Animals

 

20151222-3

 

Scott Greenberg, Fact-checking Hillary Clinton on Millionaires’ Taxes (Tax Policy Blog). “There are very few millionaires in the U.S. that pay “10 percent to nothing” in taxes.”

TaxProf, The IRS Scandal, Day 957. Today’s link goes to a Washington Post story that says “There is no love lost between Republicans in Congress and the Internal Revenue Service, whether it’s their dislike for the tax code, the current tax commissioner or their fury at the agency’s treatment a few years ago of conservative groups.” If you want to see increases in the IRS budget, you want Commissioner Koskinen to resign.

Howard Gleckman presents The TaxVox Lump of Coal Awards for the Ten Worst Tax Ideas of 2015. While I might quibble with one or two of the choices, it’s a strong list. For example:

8. Tax credits for what ails you. Hillary Clinton has taken a page out of Bill Clinton’s fiscal playbook: Identify a kitchen table problem and propose a modest tax subsidy to relieve the pain. She has tax credits for families burdened by the high costs of education, caring for aging parents, and high medical costs. And she’s proposed another credit to encourage employers to give workers a stake in their companies. My TPC colleague Gene Steuerle has a name for this: tax deform.

It’s more than a federal problem, for sure.

 

Matt Gardner, What Apple’s Tim Cook Gets Wrong About Its Tax Avoidance (Tax Justice Blog). Mr. Cook has the temerity to think that he has a duty to shareholders, instead of to grasping politicians.

 

Career Corner (or, News from the Profession). Former EY Employee Who Liked Secretly Filming People in the Bathroom Given Four Years to Think About His Choices (Caleb Newquist, Going Concern).

 

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Tax Roundup, 12/21/15: Winter’s here, along with a new tax law. Fixed-asset planning time!

Monday, December 21st, 2015 by Joe Kristan

20151211-1It’s the darkest day of the year, but with the signing of the Extender Bill, H.R. 2029, we are no longer in the dark for year-end fixed asset tax planning. The “PATH” act has some important fixed-asset provisions:

A permanent (and inflation-indexed) $500,000 annual limit for Section 179 deductions. This provision lets qualifying taxpayers deduct currently fixed asset costs that would otherwise have to be capitalized and depreciated over multiple years.

“Bonus Depreciation” is extended through 2019. This provision allows taxpayers to deduct 50% of the cost of depreciable property in the first depreciable year, with the remaining cost depreciated over the property’s normal tax life. Unlike Section 179, it cannot be taken for used property, but unlike Section 179, it can be used to generate net operating losses.

-15-year depreciation is made permanent for “Qualified Leasehold Improvement Property , Qualified Restaurant Buildings and Improvements, and Qualified Retail Improvements. These rules enable taxpayers to depreciate these items over 15 years, rather than the usual 39 year life for commercial buildings.

In theory, this provides a great opportunity to knock down your 2015 tax bill with last-minute purchases of fixed assets. But there’s a catch. It’s not enough to buy and pay for new fixed assets to deduct them this year. They also have to be “placed in service” by year end. From the IRS publication on depreciation:

You place property in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. Even if you are not using the property, it is in service when it is ready and available for its specific use.

Example 1.

Donald Steep bought a machine for his business. The machine was delivered last year. However, it was not installed and operational until this year. It is considered placed in service this year. If the machine had been ready and available for use when it was delivered, it would be considered placed in service last year even if it was not actually used until this year.

It’s not enough to have a new machine in crates on the loading dock. It has to be set up and ready to go. If you are buying a farm building, having it in pieces waiting for assembly doesn’t get you there.

That’s why year-end purchase of vehicles and farm equipment are popular. Once they arrive, they are pretty much ready to go. But you have to actually take delivery. “On order” isn’t enough. And remember that there are limits on the amount of Section 179 deduction and depreciation for passenger vehicles.

This is the first installment of our 2015 year-end planning tips series

 

6th avenue 1910

 

Russ Fox, Once Again, the IRS Doesn’t Start by Calling You:

My mother received a phone call on Saturday morning at 6 am from “Agent Smith” of the IRS demanding immediate payment of her taxes or she would find herself “thrown in jail.” Yes, the scamsters are still out there.

Now imagine you’re a senior citizen, and you get a phone call waking you up telling you to pay the IRS or you’ll find yourself in prison. It doesn’t take a genius to know that these scamsters can intimidate their victims.

Remember, if the caller demanding payment and saying the police are coming says he’s from IRS, he’s not from IRS.

Tony Nitti, Tax Court: Luring Pigs To Untimely Demise With Kool-Aid Counts As Material Participation. Sooey!

Robert D. Flach, THERE IS STILL TIME TO TAKE ADVANTAGE OF A “QCD” FOR 2015!

 

Paul Neiffer, Wind Energy Credits Extended and Phased-Out

Annette Nellen is counting down the “Top Ten Items of Tax Policy Interest for 2015.” #1 is non-tax bills used to change the tax law; #2 is IRS Funding Challenges. Anybody who is serious about improving IRS funding should be demanding the resignation of Commissioner Koskinen. Nobody’s going to trust him with extra funding.

Jason Dinesen, From the Archives: Insolvency and Canceled Debt: Make Sure You Can Prove It!

Jim Maule, Winning Back Your Tax Payments. “A reader made me aware of a recent suggestion that every taxpayer who files a timely and honest tax return, along with timely payment, be entered into a lottery.” It a way, that’s already true.

Leslie Book, Extenders Bill Gives IRS Additional Powers to Impose Penalties on Preparers and Disallow Refundable Credits (Procedurally Taxing). “Under the new law,  the accuracy-related penalty can be applied to any part of a reduced refundable credit subject to deficiency procedures.”

Peter Reilly, Bernie Sanders And The 90% Income Tax Rate That He Does Not Call For. ” Bernie Sanders wants us to have an economy like it was in the sixties and early seventies, when a summer of hard work could pay a year’s tuition and there were plenty of factory jobs that would support a family.” Maybe Bernie should reconsider his nostalgia.

Robert Wood, New Law Says Money For Wrongful Convictions Is Tax Free

TaxGrrrl, 12 Days Of Charitable Giving 2015: Wounded Warrior Project

Kay Bell gets into the holiday spirit with Christmas gifts for tax and financial geeks

 

old walnut

 

TaxProf, The IRS Scandal, Day 954Day 955Day 956. Coverage of the limits on IRS power included in the extender and omnibus legislation.

Alex Tabarrok, Subsidies Increase Tuition, Part XIV (Marginal Revolution):

Remarkably, so much of the subsidy is translated into higher tuition that enrollment doesn’t increase! What does happen is that students take on more debt, which many of them can’t pay.

So naturally the Extenders bill made the American Opportunity Tax Credit permanent.

Jared Walczak, The Opening Salvo of 2016’s Soda Tax Battle (Tax Policy Blog). “Soda taxes are poised to be on the agenda in many cities in 2016, an effort spearheaded by former New York City Mayor Michael Bloomberg.” I propose a tax on people who can’t mind their own business.

Renu Zaretsky, Promises, Hopes, and Complaints. Today’s TaxVox headline roundup covers Hillary promises, Nevada trolling for ribbon-cuttings with taxpayer money, and Apple’s CEO tax code thoughts: “He wants changes to the US tax code, which ‘was made for the Industrial Age, not the Digital Age… It’s backwards. It’s awful for America.'”

 

News from the Profession. Let’s Help Deloitte Global CEO Punit Renjen With His First Tweet (Caleb Newquist, Going Concern).

 

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Tax Roundup, 12/18/15: 2016 standard mileage rates are out. And: Extender bill clears House.

Friday, December 18th, 2015 by Joe Kristan

Accounting Today newsletter visitors: The post about fines and penalties is here.

54 cents

54 cents. The IRS yesterday released the new standard mileage rates for 2016:

Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 54 cents per mile for business miles driven, down from 57.5 cents for 2015
  • 19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015
  • 14 cents per mile driven in service of charitable organizations

The business mileage rate decreased 3.5 cents per mile and the medical, and moving expense rates decrease 4 cents per mile from the 2015 rates. The charitable rate is based on statute.

Gas has come down. Blame the speculators!

Related: William Perez, How to Deduct Car and Truck Expenses on Your TaxesKay Bell, Business mileage deduction rate to drop in 2016Russ Fox, 2016 Standard Mileage Rates Released

 

Extender bill moves to Senate. The House of Representatives yesterday approved the permanent extender bill, H.R. 2029, on a 318-109 vote. The bill moves to the Senate. The Hill reports:

In the Senate, support for the tax measure is more bipartisan than it is in the House. Senate Finance Committee ranking member Ron Wyden (D-Ore.) joined with the Republican chairmen of the House and Senate tax-writing committees in announcing the deal.

The Senate’s third-ranking Democrat, Charles Schumer (N.Y.), released a statement Wednesday praising the fact that the bill would cement a tax benefit for mass transit commuters in a win for his state.

The Extender bill will be considered as part of a package in the Seanate, reports Tax Analysts ($link):

House GOP leaders worked throughout the day to build support for passage of an omnibus appropriations bill for fiscal 2016. The $1.1 trillion spending measure, which is also an amendment to H.R. 2029, is scheduled for a vote on December 18. Lawmakers expect that both the tax and spending measures will be combined into one bill and move to the Senate later that day, where it is expected to pass with bipartisan support. 

The Hill reports the Senate vote may happen as soon as today.

Related: Scott Greenberg, The Twelve Most Important Provisions in the Latest Tax Bill (Tax Policy Blog). #1 on the list is the permanent $500,000 Section 179 ceiling.

 

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Fresh Friday Buzz! From Robert D. Flach.

Gretchen Tegeler, Change is difficult, as failed suburban services merger showed (IowaBiz.com).  “First, never assume anything when it comes to change, even if it seems like reasonable change. Always expect active opposition.”

Jim Maule, You Mean That Tax Refund Isn’t for Me? Really?. Judge Judy deals with a tax refund spent by an ex-girlfriend.

Peter Reilly, Venus Flytraps And Elusive Gator On Golf Course Not Worth Millions In Tax Deductions. A conservation easement goes very bad.

Robert Wood, Supermodel Bar Refaeli’s Alleged Tax Evasion On Gifts: Must You Report Yours? Gifts aren’t taxable income in the U.S., but the IRS doesn’t have to believe that money you receive is actually a gift, rather than compensation. It even has a form to report large gifts from overseas (Form 3520) so they can second guess whether amounts really are “gifts.” Large fines apply if you don’t file the form for years you receive such gifts.

TaxGrrrl, Tax Preparer For Mike ‘The Situation’ Sorrentino Pleads Guilty To Tax Fraud Conspiracy.

 

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Renu Zaretsky, Will they or won’t they? Today’s TaxVox headline roundup covers prospects for the extender bill, among other things.

TaxProf, The IRS Scandal, Day 953

Richard Phillips, Tax Wars: 3 Lessons about Tax Policy from the Star Wars Universe (Tax Policy Blog). “The Star Wars universe has problems with corporate tax enforcement and shell companies.”

News from the Profession. Big 4 Firms Still Getting Used to This Whole Regulation Thing (Caleb Newquist, Going Concern)

 

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Tax Roundup, 12/15/15: Is today the day we see an extender bill? And: carrybacks and other legends.

Tuesday, December 15th, 2015 by Joe Kristan
This happened in 2008. It's raining again.

It’s flooding again!

We may see extender legislation today. Or tomorrow. Or maybe never. Congressional negotiators haven’t given up on passing a “permanent extension” of some of the perpetually-expiring tax breaks. The breaks died at the end of 2014, and Congress needs to re-enact them to enable taxpayers to claim them on 2015 returns.

The only people who really know the status of negotiations are in Washington back rooms. The Hill, a publication whose business is to haunt those back rooms, reports that negotiations on a permanent extender package are coming to conclusion at the same time as a trillion-dollar “omnibus” spending bill:

The debate has become intermingled with the battle over the separate tax extenders proposal. After a series of short-term extensions, lawmakers in both parties want to make many of those tax breaks permanent. But Pelosi and House Democrats say the tax package, in its current form, is both too big and tilts too heavily in favor of corporations at the expense of individuals and federal revenues.

Pelosi has pushed to index the child tax credit to inflation, which Republicans oppose. Even then, Pelosi has warned, the package would have trouble finding support among House Democrats.

Tax Analysts reports ($link)

Senate Finance Committee Chair Orrin G. Hatch, R-Utah, told reporters December 14 that the omnibus bill and the extenders bill could pass Congress by December 18 — or December 17, “if we are lucky.” He added that he thinks the two will remain separate, but that ultimately, that is up to congressional leadership.

Hatch said he was still hoping for a permanent extenders deal. “We are assiduously working on it. I think we will get it done. I think it will be fair to both sides,” he said. “And hopefully it will be a very important bill.”

According to The Hill, House Speaker Ryan promises to offer legislative language three days before any vote. The report that may see such language today, with a vote Thursday or Friday. If a bill becomes available, I will update this post with a link.

Failure is always an option. There seem to be many ways to sink a permanent extender bill. A two-year extender bill has been introduced as a Plan B, but even that isn’t a sure thing. A Senate staff member was at the Ames tax school yesterday, and he said he expects a two-year extender bill, for what that’s worth. I still think that is the most likely result, but I would sure prefer to be proved wrong by a permanent bill.

Related: Paul Neiffer, One Year Later:

We are hearing from various sources that the tax extender bill will not be done until likely this Saturday which will be December 19.  Last year, the bill was signed on December 19, so if Congress passes it on the 19th and heads home, the tax extender bill this year will be even later than last year.  However, the good news that we continue to hear that it will be a two-year extension for both 2015 AND 2016.

A one-year bill is plan C. Complete failure is Plan D.

 

Jared Walczak, Corporate Net Operating Loss Carryforward and Carryback Provisions by State (Tax Policy Blog):

Net operating loss deductions are important because many businesses operate in industries that fluctuate greatly with the business cycle. They might experience considerable profits one year, but then be in the hole the next year. Net operating loss carryforwards and carrybacks help those businesses to “smooth” their income, so that the tax code is more neutral with respect to time.

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Iowa unfortunately doesn’t allow carrybacks. This increases the possibility that a corporation could pay state taxes in excess of its income over its lifetime. An easy example would be a corporation that makes $1 million in year 1, loses $2 million in year 2, and closes. The corporation would have paid around $100,000 to IOwa in year 1 and would never get it back, even though its lifetime income was negative.

Iowa does allow a 20-year loss carryforward, if the loss corporation lives that long.

 

buzz20150827Buzz! Today’s Buzz roundup from Robert D. Flach covers extenders and reasonable comp, and offers a trivia challenge and a Trumpian devotion.

William Perez, Moving? How to Tell the IRS about a Change of Address

Russ Fox, If a Professional Prepares Your Return, Are You Exempt from the Accuracy-Related Penalty? “If you’re signing a return with $1 million of income, isn’t it worth more than a few seconds to review it? I would certainly think so.”

Jason Dinesen, The EIC Isn’t the Only Place Tax Fraud Happens. “EIC clients who are trying to commit fraud are indeed dangerous to us tax pros … but so is the small business client who’s trying to commit fraud.”

 

Robert Wood, Foreign Banks Pay To Avoid Tax Evasion Charges As More Americans Disclose Offshore Accounts.

Peter Reilly, Solid Due Dilgence Shields Trucking Heirs From IRS Attack. “The Tax Court decision in the case of the John Alterman Trust  is one of the best positive examples I have seen of Reilly’s Fourth Law of Tax Planning – Execution isn’t everything, but it’s a lot – in a while.”

Christine SpeidelReview of the First Tax Year of the Affordable Care Act and Look Ahead: Part 1 (Procedurally Taxing).

Matt McKinney, 3 key differences between an Iowa LLC and a corporation (IowaBiz.com)

It’s not just Iowa. Another CO-OP foundering. “As the list of failing CO-OPs continues to grow, it’s beginning to seem like the model may, in fact, be fatally flawed.”

21st Century tax problems. Lawsuit Alleges IRS Denied Deduction For Fertility Treatments Because Being Gay Is A ‘Choice’. (TaxGrrrl)

 

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Donald Marron, Should Governments Tax Unhealthy Foods and Drinks? (TaxVox). “We find that a US tax on sugar-sweetened beverages would be highly regressive, imposing more than four times as much burden, relative to income, on people in the bottom fifth of the income distribution as on those in the top fifth.”

Sin taxes are sacrifices imposed on the poor to flatter the consciences of the nosy rich.

TaxProf, The IRS Scandal, Day 950

Joseph Thorndike, How Profit Sharing Sent Captain Ahab in Search of Moby Dick (Tax Analysts Blog). While Ahab had his problems, ERISA compliance wasn’t one of them.

News from the Profession. Don’t Worry Tax People, You Have a Lame Hashtag, Too (Caleb Newquist, Going Concern).

Every Bride dreams of this. Tax Profs Christine Allie  And Stuart Lazar Find Love At AALS, Marry At Tax Court (TaxProf)

 

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Tax Roundup, 12/14/15: Ames! And, fine happy! Government is just how we take money from one another.

Monday, December 14th, 2015 by Joe Kristan

20140513-1Ames! Today is the last and biggest Day 1 of the ISU Center for Agricultural Law and Taxation Farm and Urban Tax Schools. 275 or so people drove through the rain to Ames for the two-day session, and another 150 are participating via Webinar. I learn a lot from the participants and their questions, and it’s a lot of fun. Thanks to everyone who has attended.

Run a red light. The use of penalties to fund government operations is an ugly development in public finance. At the local level, the use of the police department as a revenue generator via petty fines and traffic cameras contributes to distrust and hostility towards law enforcement. At the national level, it leads to unfair and sometimes ruinous penalties for paperwork failures by law-abiding taxpayers. In either case, it leads to perverse incentives. The government has the incentive to make compliance difficult so that it can impose more penalties, while the citizenry learns to avoid getting government help for fear of stumbling into an obscure fine.

So naturally Congress is doing more of it. The “Trade Facilitation and Trade Enforcement Act of 2015” (HR 644) bill is largely “paid for” by an increase in fines for file timely returns.

The failure-to-file penalty is normally 5% per month, up to 25%, for late filing, based on the amount of unpaid tax required to be shown on the return. But there is a floor. The tax cannot be less than the lesser of

-$135, or

-100% of the amount required to be shown on the return.

if the return is filed more than 60 days late.

So if a taxpayer files a return showing a $250 balance due 2 1/2 months late, the penalty for failure to file is $135, instead of the $37.50 you would get under the normal computation.

But there’s more! Penalty, there is. The short-term spending bill increases the $135 penalty to $205 for returns due after 2015 (Amended Sec. 6651(a)).

This penalty is practically targeted at small filers. Big taxpayers will  usually exceed the floor if they file late. So to “pay for” a speculative cost of a trade bill, small taxpayers will get hit a little harder if they are out of compliance and try to get back in the system. It operates as a fine for coming into compliance — which will make it just a little harder for taxpayers who are trying to clean up their finances to do so.

While Congress just gets done in a few days, the fines will remain on the books forever. This is why I am not a fan of tax “pay fors” for legislation. The damage to the tax law will continue long after this Congress is forgotten.

Related: Kay Bell, Tax-free Internet access, tougher non-filing penalties closer to enactment as trade bill clears House

 

Extenders. As of this morning, it seems to be up in the air. The Hill reports that the leader of House Democrats says she isn’t happy with the permanent extender bill being negotiated. At least one Ways and Means Democrat wants to go with a one-year extension of the Lazarus provisions, including the Research Credit, Bonus Depreciation, and the $500,000 Section 179 limit. The Republican Ways and Means Chairman has proposed a two-year bill if Congress can’t pass a permanent extender bill. A one-year extension would mean another extender fight in 2016.

In any case, it will all be passed at the last minute, and we can count on bad tax policy as a result.

Prior Tax Update coverage:

Extender battle extended to next week; efforts to make some breaks permanent continue.

 

Related: Paul Neiffer, Inflation-Indexed Child Tax Credit Stymies Extender Bill

 

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Peter Reilly, Sumner Redstone Liable For Tax On Long Ago Gift. The bill on the 1972 assessment is a testimony to the power of compound interest.

Russ Fox, Six Month Vacation Leads to Four and Eight Years at ClubFed. You aren’t allowed to take a vacation from your prison sentence.

Robert Wood, Why ‘Pay Me Next Year’ May Not Convince IRS On Your Taxes. “On a cash basis, you probably assume you can’t be taxed until you receive money. Yet if you have a legal right to payment but decide not to receive it, the IRS can tax you nonetheless.”

Scott Greenberg, A Federal Tax Credit for Refineries Would Probably Be a Bad Idea (Tax Policy Blog).

TaxProf, The IRS Scandal, Day 947Day 948Day 949.

 

News from the Profession. Not Even ISIS Immune to Shortage of Accounting and Finance Talent (Caleb Newquist, Going Concern).

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Tax Roundup, 12/11/15: Extender battle extended to next week; efforts to make some breaks permanent continue. And: Tina, Accidental American.

Friday, December 11th, 2015 by Joe Kristan

20151211-1Extending the week. Congress had been scheduled to go home today, but now it looks like the session will drag through the weekend while they try to agree on spending and tax legislation.

Whither the extenders? The Hill reports that hope lives for permanent enactment of several of the important Lazarus provisions that have repeatedly died – most recently at the end of 2014 — and that need to be revived to be used on 2015 returns. From the report:

I understand the current projection is for the House to post the omnibus Monday and vote on it by Wednesday,” Senate Republican Whip John Cornyn (Texas) told reporters. “The goal is to wrap things up by Wednesday evening.”

He said the omnibus would be linked to a package extending expiring tax provisions. Senate negotiators say that package is likely to make several important tax breaks open-ended and place a moratorium on two ObamaCare taxes.

“They seem to be linked, although I can’t tell you whether it will be one vote or two votes, but clearly they’re part of the overall negotiations,” he added.

What would be made permanent? At least the R&D Credit and the $500,000 Section 179 deduction. These would be accompanied by permanent, and maybe increased, earned income credits, child credits, and education credits. How likely is it? The Hill says “Senate sources on Thursday said the chances of reaching a deal on a major tax deal were greater than 50 percent.”

Nothing is certain, though. Tax Analysts reports ($link) Permanent Tax Extenders Deal Continues to Elude Lawmakers. It quotes Rep. Steve Israel (D-N.Y.) as insisting that the child credit be indexed to inflation, and that other obstacles to agreement remain:

Israel noted that ultraconservative Republicans object to including renewable energy tax credits and family credits in the extenders deal, so votes from House Democrats are still essential regardless of what deal Senate Democrats reach with Republicans.

Here I’ll just note that there appear to be no such thing as “ultraliberals” to reporters, while “ultraconservatives” abound.

Rep. Bill Flores, R-Texas, chair of the House Republican Study Committee, said December 2 that his group believes that renewable energy credits should be phased out. “Special interest giveaways like the wind production tax credit and the solar investment tax credit have overstayed their welcome and their usefulness,” he said.

Flores’s group also does not support family credits, which he called “stimulus legacy items” that should not be renewed without heightened verification and oversight.

These obstacles could result in another two-year extension of the expiring provisions, though complete failure remains an option.

Prior coverage:

Ways and Means Chair introduces a Plan B as permanent extender talks continue.

Extender week?

 

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Just how stupid is U.S. foreign taxation? This stupid. A heartbreaking and infuriating piece by Allison Christians shows the brain-dead Kafkaesque nightmare created by Congress and enforced by IRS to “crack down” on overseas taxpayers: Understanding the Accidental American: Tina’s Story. It tells the story of a 62 year-old woman who was born in the U.S. while her parents were students, but has lived all but her first six months in Canada. Ms. Christians makes a powerful case:

Related to that point, I think a taxpayer has a right to learn that her whole financial life is subject to harsh deterrents and penalties solely for the reason that it is not located in the United States, even and especially when she is not located in the United States. Again, I think she has the right to learn that not from blogs or word of mouth, but from the government that seeks to impose these rules on her. I think she’s got a right to be informed about a life-destroying force like PFIC by the government that seeks to unleash that force upon her, and a right to avoid that punishment by making different choices. And if that government can’t or won’t bother to inform her, or address the utter absurdity of stripping a person of their life savings as a consequence of inadequate form filling, I think she’s got a reason to complain that this is a pretty unfair administration of a very complex law — a law designed for millionaires with expensive tax accountants and not for Canadians carefully saving for retirement and not hiding anything from anyone.

When the IRS and the politicians crow about how effective their foreign enforcement efforts are, remember that a lot of it is coming out of the pockets of taxpayers like Tina.

(Via the TaxProf).

 

Kristine Tidgren, Iowa Court of Appeals Says LLC Corporate Veil Properly Pierced (The Ag Docket).

The court found that the trial court’s finding of inadequate capitalization was supported by substantial evidence. In so finding, the court noted the defendants’ history of moving funds between related entities, the lack of LLC assets and employees, and its failure to reduce losses to the plaintiff, despite knowing its funding was inadequate.

This sort of ruling will make businesses leery of using Iowa entities. An appeal to the Iowa Supreme Court is likely.

 

buzz 20151023-1Friday means Buzz day for Robert D. Flach. Today he covers the legislation requiring IRS to use private debt collectors, preparer regulations and more.

Jana Luttenegger Weiler, Delinquent Taxes May Mean No Passport. “ Imagine the problems for a taxpayer who is unaware of this new rule and not finding out until being stranded in the midst of traveling.”

Jason Dinesen, Choosing a Business Entity: Determining S-corporation Reasonable Salary. “A salary that’s considered reasonable for one corporation may not be reasonable for another corporation.”

Leslie Book, Tis the Season For Tax Procedure Legislation (Procedurally Taxing).  “Under the new legislation, the failure to file penalty may not be less than the lesser of $205 or 100 percent of the amount required to be shown as tax on the return (it used to be $135 or 100%).”

Robert Wood, Three Moves In December To Save Taxes Next April

TaxGrrrl, How Answering A Simple Question Makes You An Easy Target For Identity Thieves

 

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TaxProf, The IRS Scandal, Day 946

Nicole Kaeding, Proposed Tax Increases in Alaska. Alaska may get an income tax.

Steven Rosenthal, Hillary Clinton Proposes Tough New Curbs on Corporate Tax Inversions (TaxVox). The “beatings will continue until morale improves” approach.

News from the Profession. Grant Thornton Hoping to Bring Soul-Crushing Disappointment to Charlotte Hornets With New Sponsorship (Caleb Newquist, Going Concern).

 

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Tax Roundup, 12/4/15: Keeping inmates busy, Keeping CPAs fit.

Friday, December 4th, 2015 by Joe Kristan

20150916-3It’s important that our inmates feel they have a purpose. A few years ago Edward Hugh Okun was sentenced to 100 years in federal prison after being convicted on charges of buying and looting Section 1031 exchange intermediaries, stealing $126 million earmarked to close tax-free swaps, spending it on yachts and other rich-man toys.

Mr. Okun apparently tried to make the best of his situation. Tax Analysts reports ($link) that David Chityal, a Canadian national, has pleaded guilty to helping Mr. Okun divert $2.3 million in tax refunds from a fund set up to pay restitution to Mr. Okun’s fraud victims. From the report:

Following Chityal’s release in March 2010 and his deportation to Canada, the men maintained regular contact and developed plans to obtain $2.3 million in tax refunds intended for the bankruptcy estate handling Okun’s businesses. The indictment said the two men planned to put $500,000 of the tax refunds toward hiring a specific “prestigious New York lawyer” to handle Okun’s appeal and use the remainder for personal enrichment.

Chityal hired a Canadian lawyer to complete a process to grab the tax refund checks, travel to the Beaumont prison to have Okun endorse the checks, and then fly to the Turks and Caicos Islands to deposit the checks in a trust controlled by Okun. However, an attorney for the bankruptcy estate discovered the scheme, tracked the Canadian lawyer to the islands, and had the checks sent back to the United States hours before they were to be deposited.

The Bureau of Prisons inmate locator says Mr. Okun has a projected release date of April 30, 2095. This sort of thing could roll that back a bit.

Related:

A 10-year sentence is plenty, assuming fire ants are involved

WHEN A LIKE-KIND EXCHANGE IS TOO TAX FREE

Department of Justice Press release

 

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Kyle Pomerleau, Deficit Worries Over a Permanent Extenders Package? (Tax Policy Blog). The post addresses the lie underlying the nature of “temporary tax breaks”:

The extenders are a perfect example of what the current law baseline can miss. Under current law, extenders have already expired. So current law estimates assume that the federal government will collect revenue as if the extenders are no longer there.

However, this does not reflect our recent experiences with the extenders. Every year, for the past several years, Congress has retroactively extended the extenders and reduced actual revenues that the CBO believes the Treasury will collect. And there is no reason to believe that this would not keep happening. However, CBO’s current law baseline will still assume that the government will collect revenue over the next decade as if the extenders didn’t exist. In other words, the CBO current law baseline likely overstates the amount of revenue that the federal government will actually collect over the next decade.

Any “temporary” tax break that is extended once should be considered permanent for budget purposes. Maybe we should even remove the four words of the preceding sentence starting with “that.”

 

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It’s Friday! Get ready for your weekend with fresh Buzz from Robert D. Flach. Today’s roundup from Robert runs from musical theater to fraudulent earned income tax credit claims.

Speaking of musical theater, I have a son playing bass in the house band for a run of Ain’t Misbehaving in Chicago right now. Go if you can, because it’s a great show and because I want to stay in a nice nursing home someday.

Robert Wood, When Foreign Banks Ask For U.S. Taxpayer ID, How Should You Respond? “FATCA letters are everywhere, and foreign banks want you to certify that you’re complaint with the IRS.”

Jim Maule, Rubbing Tax Penalty Salt Into the Tax Liability Wound:

There are two lessons here. First, if using a preparer, be certain to provide the preparer with all necessary information, even if that means providing the preparer with more information than is needed. It is better to over-include than to under-include. Second, review the return.

A preparer signature isn’t a magic charm that makes any tax problems go away.

Keith Fogg, Who Can/Must Sign the Power of Attorney Form (Procedurally Taxing)

Jack Townsend, IRS Use of Cell-Site Simulators (Also called Stingray) to Retrieve Information About and From Cell Phones

Me, Estimated tax payments: who needs to file quarterly. My new post at IowaBiz.com, the Des Moines Business Record’s Business Professionals’ Blog.

 

Howard Gleckman, The Highway Bill Takes Congress on a FAST Track to More Debt (TaxVox). Fiscal gimmickry lives.

TaxProf, The IRS Scandal, Day 938. Today’s post links to a voice for the “no scandal here” crowd.

They lack a lot more than that. Illinois Needs Budget, but Leaders Lack Urgency (Sebastian Johnson, Tax Justice Blog).

 

News from the Profession. Here Are Some Health Iniatives Accounting Firms Should Consider for the Upcoming Busy Season (Leona May, Going Concern). I’m not sure “treadmill desks” send the right message.

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Tax Roundup, 12/3/15: Bedbugs and Cadillacs, and tax uses for old-fashioned index cards.

Thursday, December 3rd, 2015 by Joe Kristan
CDC image

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Drive all night. Mr. Charley told me so. An old joke says that you should spend for nice wheels because after all, while you can’t drive a house, you can always sleep in a car.  A case in Tax Court yesterday involves a taxpayer who may have taken that advice to heart. Fortunately, he also took to heart the tax rules that require you to document your business miles.

The taxpayer, a Mr. Charley, had a business (“LubriDyne”) that involved devices used to clean hydraulic oil used by injection molders. He bought a used Cadillac with a trunk big enough to hold his demonstration equipment and traveled in it far and wide, according to Judge Paris (my emphasis):

The most effective way for Mr. Charley to pitch LubriDyne was to drive to clients and demonstrate how the equipment worked. He began most trips from his home where he officed and stored his equipment. All of Mr. Charley’s business trips were made in the Cadillac. Many of LubriDyne’s clients were within a four- to five-hour radius of Mr. Charley’s Missouri home although he also visited clients in Colorado, California, and Wisconsin. If Mr. Charley did not return home at the end of each day, he would either spend the night in his car or drive through the night.6When he did stay overnight somewhere, he stayed with friends at their houses. Mrs. Charley did not accompany Mr. Charley on any of his business trips in 2010.

Footnote six explains the aversion to motels:

6 Mr. Charley testified that petitioners had spent $2,500 to rid their home of bed bugs after one hotel stay. Since then, he does not stay at hotels when he travels.

Whether or not you sleep in your car, the tax law requires extra substantiation for travel expenses. From the Tax Court opinion (citations omitted):

Under section 274(d), a taxpayer must satisfy strict substantiation requirements before a deduction is allowed. To deduct expenses related to travel, meals and entertainment, gifts, or listed property, the taxpayer must “substantiate by adequate records or by sufficient evidence corroborating the taxpayer’s own statement”: (1) the amount of the expense (i.e., mileage); (2) the time and place of the expense; (3) the business purpose of the expense; and (4) in the case of entertainment, the business relationship between the taxpayer and the person being entertained. Listed property includes passenger automobiles. To satisfy the requirements of section 274(d) by adequate records, a taxpayer must maintain records and documentary evidence that in combination are sufficient to establish each element of an expenditure or use.

Flickr image courtesy dave_7 under Creative Commons license.

Flickr image courtesy dave_7 under Creative Commons license.

This means the “Cohan Rule,” which enables courts to estimate expenses that are otherwise inadequately documented, cannot be used for car expenses. The IRS said Mr. Charley’s substantiation fell short. The Tax Court explained the taxpayer travel records:

Mr. Charley recorded the point-of-contact, telephone number, date he visited the client, and the client’s business address on an index card. Each index card was created at the time of the travel to that client. Although the mileage from Mr. Charley’s home to each client was not included on the index cards, most of his client’s business addresses included the city and State where the client was located. Some of the index cards record visits to multiple clients in the same geographical area.

The opinion doesn’t say why the IRS objected to the records — perhaps because he didn’t keep an actual travel log in the car? In any case, Judge Paris said the records were good enough (citations again omitted):

The Court finds that Mr. Charley substantiated that he had business mileage expenses for 2010 through his index cards and testimony — although not the amount reported on petitioners’ return.While Mr. Charley’s travel schedule may have been extreme, such extremity is not a bar to deducting otherwise properly substantiated expenses.

Mr. Charley left from his home office to begin each business trip. He would return home that day, drive through the night to return home the following day, or continue to another client in the same geographic location as the first client on the  business trip. Mr. Charley’s index cards contain the business address for almost every client his visited in 2010. Allowing Mr. Charley the mileage for the shortest routes between his home office and his clients’ addresses, the Court finds that petitioners are entitled to car and truck expenses for 13,731 business miles for 2010.

While fewer miles than claimed on the return, it was 13,731 miles more than the IRS allowed.

The Moral: You have to be able to substantiate your travel to deduct it, but there’s more than one way to skin a Cadillac. While IRS loves auto logs, a detailed calendar  or a smartphone app capturing the same information will work. So will old-fashioned 3×5 cards.

Cite: Charley, T.C. Memo 2015-232.

 

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Gang Truce. Congress Reaches Deal on Five-Year Highway Funding Bill (Kyle Pomerleau, Tax Policy Blog). I find bipartisanship often is as helpful to the rest of us as an agreement to split crime proceeds between rival street gangs. The Highway bill is that sort of bipartisanship, with awful revenue raisers including a provision to revoke passports of “delinquent” taxpayers.

Anybody who has worked with the IRS knows that IRS recordkeeping is only getting worse. It can take years to fix an IRS mistake. Inevitably, some taxpayer will fall victim to a computer burp while overseas and be stranded and unable to sort out the mess for weeks. I just hope it’s a Congressman.

 

Robert D. Flach, YEAR-END AND HOLIDAY CHARITABLE CONTRIBUTIONS. “You can no longer say you put a five or ten dollar bill in the collection plate each week.” Not if you want a deduction, anyway.

Russ Fox, Third Party Transcript Requests Reportedly Will No Longer be Processed by the IRS. ” This policy has not been officially published anywhere by the IRS, but based on IRS actions it appears that this policy was put in place because of identity theft concerns.”

Robert Wood, EU Hunts McDonald’s No-Tax Secret Sauce, Could End Love For Tax-Free Royalties

 

Keith Fogg, Legitimate Claim of 5th Amendment on Tax Return Should not Result in Frivolous Return Penalty (Procedurally Taxing). “Citing the 5th amendment on a tax return is something that a tax protestor might do which is why such an assertion makes the list, but it is also something that someone with a legitimate fear of prosecution should do.”

Jason Dinesen, Glossary: Section 179. “As usual, Congress continues to dither on any tax extender bill for 2015.”

Paul Neiffer, A Slow Slog to the Finish Line on Section 179

Jack Townsend, In Summons Enforcement Proceeding, Court Rejects Taxpayer’s Lack of Possession Defense For Foreign Account Documents

Kay Bell, December! Time for shopping, holiday parties and taxes! A good discussion of some standard year-end planning techniques.

 

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Roberton Williams, The ACA Penalty Tax Is Going Up If You Don’t Get Health Insurance. (TaxV0x).

Peter Reilly, What Art Of The Deal Tells Us About Donald Trump And His Tax Views

TaxProf, The IRS Scandal, Day 938

 

The Critical Question. What’s Next for Microsoft After Some Expensive Table Pounding? (Tax Analysts Blog)

News from the Profession. Fake Occupants Caused Some Problems in Grant Thornton’s Audit of Assisted Living Concepts (Caleb Newquist, Going Concern). Yeah, fake customers are probably not a good thing to find in an audit.

 

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Tax Roundup, 11/25/15: Don’t bother depreciating things up to $2,500. And: Have a great Thanksgiving!

Wednesday, November 25th, 2015 by Joe Kristan

20141226-1$2,500 is the new $500. The IRS yesterday announced (Notice 2015-82) that it was increasing the maximum “safe harbor” expensing amount from $500 per item to $2,500 for taxpayers without an “applicable financial statement” — that is, most taxpayers. Taxpayers with an AFS can elect to expense items up to $5,000. These safe harbors enable taxpayers to not worry about capitalizing and depreciating items up to these amounts.

The new safe harbor takes effect for years starting January 1, 2016 and later.

The safe harbors are authorized by treasury regulations for taxpayers who have in place at the beginning of the tax year “accounting procedures treating as an expense for non-tax purposes” that expense such “per invoice (or per item as substantiated by invoice)” So make sure you write down somewhere that you have a policy of expensing everything up to $2,500 before December 31.

This is a good, if small, step towards allowing taxpayers to expense capital costs. I object to the “applicable financial statement” requirement for the $5,000 amount, as the tax law shouldn’t care whether you have a CPA-certified audit or that you have to report your financials to a government agency, but at least this closes the gap some.   I should be happy, I suppose, that it gives my auditing brethren a small sales tool.

Related: Russ Fox, IRS Increases De Minimis Expense Threshold to $2,500 from $500 for 2016 OnwardTony Nitti, IRS: Taxpayers May Immediately Deduct The Purchase Of Assets Costing Less Than $2,500.

 

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William Perez, Year End Tax Planning Ideas for Self Employed Persons.

Robert Wood, Passports Required For Domestic Travel In 2016, But IRS Can Revoke Passports For Taxes. Giving IRS control over passports is a horrible idea. They make so many errors, and the errors can be so hard to fix.

Robert D. Flach, MORTGAGE INTEREST LIMITATIONS. “But the Court of Appeals ruled that [unmarried] co-owners of one primary residence can each claim mortgage interest on up to $1 Million in acquisition debt and $100,000 of home equity debt.”

 

Annette Nellen, Sales Tax as a Penalty? “A proposed California initiative may surprise you.  It calls for a 1000% sales tax on ‘political advertisements.'”

Kay Bell, IRS should focus tax audit efforts on richer taxpayers. Willie Sutton might agree. 

Paul Neiffer, FAFSA Reporting Changes. “The Department of Education has issued new rules that make this process be much less of a hassle; however, you have to wait until 2017 to take advantage of it.  Beginning in that year, your required FAFSA income tax return will be a whole year in arrears.” About time.

Jason Dinesen, From the Archives: Home Offices, Principal Place of Business, and Mileage Deductions

Carl Smith, New, Additional Proposed Innocent Spouse Regulations Issued (Part 1), (Part 2) (Procedurally Taxing)

TaxGrrrl, Don’t Try This At Home: Avoid These 10 Money Missteps That Landed Reality TV Stars In Trouble.

 

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TaxProf, The IRS Scandal, Day 930. Today’s link on the “investigation” of the scandal by the Justice Department.

 

Scott Hodge, The Simple Solution to the Pfizer Deal: Cut the Rate and Move to a Territorial Tax System (Tax Policy Blog). So, you could actually do something like this that makes sense, or you could listen to….

Richard Phillips, Congress Must Act Now to Stop Pfizer and Other Companies from Inverting (Tax Justice Blog). The “continue the beatings until morale improves” approach.

News from the Profession. A Surprising Number of Accountants Think Accountants Are Incredibly Corrupt (Caleb Newquist, Going Concern).

 

Programming Note: The Tax Update will be taking the rest of the week off to celebrate Thanksgiving. I am thankful for the many fine tax bloggers I get to read when putting the Tax Roundups together, and I am especially thankful for those of you who stop by to read the Tax Update. Enjoy your Thanksgiving, and maybe start with Jim Maule’s holiday musings: Thanks Again! “For as long as I’ve been writing this blog, I’ve been sharing a Thanksgiving post to express my gratitude for a variety of people, events, and things.”

 

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Tax Roundup, 11/19/15: Play sober, play taxable (updated). And: Administration says no to permanent bonus depreciation.

Thursday, November 19th, 2015 by Joe Kristan

 

20150805-2Gaming while sober: maybe halfway right, but not even halfway exempt. See Update Below. Sobering up is hard to do for alcoholics. That’s why they’re alcoholics in the first place.

One of the hard parts is that many of the things you enjoy may be associated with alcohol.  That’s where GameHearts, A Montana Nonprofit Corporation, came in. The Tax Court picks up the story:

On July 14, 2010, GameHearts filed a Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. In the Form 1023 GameHearts provided the following description of its activities:

    GameHearts is a public benefit nonprofit organization committed to providing alternative forms of entertainment to adult members of the Kalispell area for the purpose of promoting adult sobriety. The program achieves its directive by providing free and low cost tabletop gaming activities in a supervised[,] non-alcoholic, sober environment, along with access to gaming accessories that are provided without cost to the participants. In fact, beginning players can learn and obtain free gaming materials solely for playing.

 

The IRS was unmoved:

In a June 3, 2013, letter respondent notified GameHearts of the conclusion that, on the basis of the information provided, GameHearts did not qualify for exemption under section 501(a) as an organization described in section 501(c)(3) because GameHearts was not organized or operated exclusively for exempt purposes. Respondent based this determination on the conclusion that (1) GameHearts failed to establish that it benefited a charitable class; (2) GameHearts’ nonexempt activities were more substantial than its exempt activities; and (3) GameHearts did not meet the requirements of section 1.501(c)(3)-1(d), Income Tax Regs., “because it did not limit activities to addicts with a low income.”

So the Tax Court got involved. Unfortunately for sober gamers in Montana, the court sided with the IRS:

While it may be laudable, in the light of the administrative record in this case promotion of sober recreation is insufficient justification here for tax-exempt status under a statute that must be construed strictly. The decisive factor here is that the form of recreation offered as therapy also is offered by for-profit entities, and GameHearts even emphasized, in its application for tax exemption, that it would introduce new participants to that for-profit recreational market and “boost the overall market shares of the industry”. We also note that GameHearts received contributions of surplus materials from the industry. While GameHearts itself does not profit from the recreation it offers and could not offer recreational gaming experiences that would compete in the for-profit recreational gaming markets, we conclude nonetheless, consistent with our holdings in Schoger Found. and Wayne Baseball, that recreation is a significant purpose, in addition to the therapy provided, because of the inherently commercial nature of the recreation and the ties to the for-profit recreational gaming industry.

We therefore hold that GameHearts does not operate exclusively for charitable purposes within the meaning of section 501(c)(3). 

In other words, if there’s a market niche for sober gaming in Montana, it should be filled by somebody trying to make money.

Update: Peter Reilly has a well-researched post on this case, and he points out that the “gaming” involved was not casino gambling, which I incorrectly assumed in my initial reading of the article. I have made some modifications to my post to remove implications otherwise, and I thank Peter for his correction and for his in depth story.

Cite: GameHearts, T.C. Memo. 2015-218; No. 20303-13X

 

 

Administration opposes extending bonus depreciation. Tax Analysts reports ($link):

The Obama administration does not support a tax extenders package that would make bonus depreciation permanent, Treasury Secretary Jacob Lew told House Ways and Means Committee Democrats on November 18.

The administration is willing to consider making other tax extenders permanent, including the research credit and small business expensing, as long as the American opportunity tax credit and the expanded child tax and earned income tax credits are made permanent, according to House aides.

Secretary Lew didn’t rule out a “temporary” extension of bonus depreciation, and I suspect that’s what we’ll get.

 

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Russ Fox, IRSAC Report Has Hits and Errors:

IRSAC laments IRS funding. While I agree it would be nice to have the IRS fully funded, the problem was caused by the IRS (and especially Chairman Koskinen) and the IRS scandal. Until the IRS comes clean, Republicans in Congress rightly will not allow full funding.

This is why those who want IRS funding increased should insist on Koskinen’s resignation.

TaxGrrrl, Report Accuses IRS Of Encouraging Illegal Immigrants To File Using False Info, Identity Fraud. Well, increase their budget, then!

 

Jason Dinesen, Choosing a Business Entity: S-Corporation. “S-corporations share many of the same characteristics of partnerships. The biggest difference is, owners who work in the business day-to-day are paid a salary.”

Kay Bell, Start your retirement planning and saving ASAP. Starting in your 20s makes a huge difference as you approach your 60s. 

Robert Wood, Lawyer Faces Up To 50 Years Prison Over Payroll Taxes. Always remit your payroll taxes, no matter who else you need to stiff.

 

Dave Nelson, Preparing for a cyberattack or data breach (IowaBiz.com). “In today’s world of nonstop cyberattacks, companies must prepare for when, not if, they are attacked.”

Leslie Book, International Conference on Taxpayer Rights Kicks off Today. (Procedurally Taxing).

Peter Reilly, Ownership Through LLC Kills Local Charitable Property Tax Exemption. “Disregarded For Federal Purposes Does Not Mean Disregarded For Local Purposes”

 

 

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David Brunori, Business Entities Pay a Lot of State Taxes (Tax Analysts Blog):

In 2014 businesses paid about $142 billion in sales tax, or about 20.7 percent of taxes paid. More distressing is that they paid $5.8 billion more than in the prior year. The sales taxation of business inputs remains one of the greatest tax policy failings of the last 100 years. Business entities should not pay sales taxes on their services. Those taxes get passed on to someone else without their knowledge. Hiding the tax burden goes against every principle of transparent good government.

Iowa’s Department of Revenue has taken a small step to reduce the taxation of business inputs, to the outrage of all sorts of goodthinkers.

 

David Greenberg asks How Has Federal Revenue Changed Over Time? (Tax Policy Blog). This picture sums it up:

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The corporation tax continues to decline in importance with the spread in pass-through entities. That won’t change regardless of what economic illiterates would wish.

 

Howard Gleckman, Would Two Year Budgeting Help Break the Fiscal Impasse? I think it would just reschedule the impasses.

 

TaxProf, The IRS Scandal, Day 924

Carl Davis, Congress Searches the Couch Cushions for Road Funding Money (Tax Justice Blog).

 

News from the Profession. At Least One SEC Commissioner Has a Sense of Humor (Caleb Newquist, Going Concern).

 

20151119-2Things that happened on November 19. Today’s the 152nd anniversary of the Gettysburg Address, when President Lincoln dedicated the Gettysburg battlefield cemetery by saying: “The world will little note, nor long remember what we say here; while it can never forget what they did here.”

81 years later on November 19, another war claimed another young man. A little note and a little remembering here.

 

 

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Tax Roundup, 11/17/15: We’re #40! The new State Business Tax Climate Index comes out today.

Tuesday, November 17th, 2015 by Joe Kristan
If Iowa's income tax were a car, it would look like this.

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

Iowa rises out of bottom ten in State Business Tax Climate index. The Tax Foundation released its 2016 State Business Tax Climate Index today, and Iowa is no longer one of the ten-worst states in the index. Barely.

Maryland and Iowa changed places from last year in the index, making Iowa the 40th state in the annual index of business tax climates. Iowa’s overall score improved slightly, while Maryland got a little worse, especially in its unemployment insurance ranking. Iowa failed to improve its ranking in any of the five components making up the index. Its ranking fell in the sales tax, unemployment tax, and property tax categories, and it maintained its 32nd place individual tax and 49th place in corporation tax. Still, Maryland’s seven-place plunge in its unemployment tax rankings enabled it to crawl underneath Iowa in the index.

The result isn’t surprising, as Iowa’s tax law is nearly unchanged from last year. The split control of the Iowa legislature has blocked any significant tax legislation. I do suspect that the sales tax component will improve in the 2017 index based on the change in the definition of sales tax-exempt manufacturing supplies under an administrative ruling set to take effect July 1 of next year.

Iowa, in short, continues to have a bad system, one changed very little in structure since the 1970s, with high rates and a rat’s nest of feel-good deductions and special interest subsidies producing a hostile system for small businesses lacking expensive advisors and good friends at the statehouse. It’s a system crying for reform. The Tax Update’s Quick and Dirty Iowa Tax Reform Plan would be a huge improvement.

Map by the Tax Foundation

Map by the Tax Foundation

 

Fresh Buzz! Tuesday again brings a fresh Buzz roundup from Robert D. Flach, covering ground from accounting nostalgia to changes in this year’s W-2.

Robert Wood, Clinton Foundation Amends 4 Years Taxes, Admits Speech Fees Weren’t Donations. Ah, but better keep an eye on those sneaky Tea Partiers. The laundering of speech fees through the foundation, instead of through Clinton 1040s, seems inherently sketchy.

Jay A. Soled, Kathleen DeLaney ThomasThe Nonreporting of Modern Fringe Benefits (Procedurally Taxing). “But there is a strange phenomenon transpiring with respect to this new breed of fringe benefits. While they generally do not fall within the delineated scope of Code section 132’s enumerated exemptions, they are nevertheless not being reported as income by employers (nor by the employees, who follow suit).”

Jason Dinesen, Glossary: Review (Of Financial Statements). “In a review, the CPA examines a company’s financials to verify that they are free of deficiencies, but the firm does not review internal controls or fraud risks as in an audit.”

Jack Townsend, Is Jury Unanimity Required as to at Least One Obstructive Act for Tax Obstruction?

Paul Neiffer, Trends in Write-Offs of Farm Assets:

The Tax Foundation periodically comes out with good information on tax statistics.  They recently issued a report on corporate investment in equipment for tax year 2012.  My perception has been that most of the equipment purchased during 2012 was new equipment.  Based on this report, my perception may be in error (or not).

I think Paul is correct in believing that Section 179 is a bigger deal for most farmers than bonus depreciation.

Kay Bell, Cell phone service taxes average 18%, an all-time high

 


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Peter Reilly, Bernie Sanders Less Of A Socialist Than Dwight Eisenhower. Peter bases this (absurd) headline on the Sanders statement that he wouldn’t raise income tax rates to the 90% amount seen in the Eisenhower administration. I suspect Peter was being deliberately provocative or sarcastic, as I think he knows his history too well to actually believe that.

UPDATE: Peter corrects my speculation in the comments: “On the not as Socialist as Dwight Eisenhower thing, I was quoting Sanders (or paraphrasing) as I was live blogging the debates.” Peter has a much stronger stomach than I do to actually watch these things.

 

Jim Maule, Not a Surprise: Tax Ignorance Afflicts Presidential Candidates and CNN.  While the good professor focuses on the size of the tax code, I think that’s just a reflection of a much bigger problem — one that would be corrected by my proposal that all politicians, and all candidates, be required to do their returns by hand in a live webcast. I would also require a comment bar so we could all help the politicians — “hey, do you really think your used briefs are worth $3 each?”

 

Annette Nellen, “Abolish the IRS” Distracts from Needed Reforms.

TaxProf, The IRS Scandal, Day 922. The Attorney General will get to explain why she concludes there were no crimes committed.

Renu Zaretsky, Maybe peace, definitely another patch, and many refunds… Today’s TaxVox headline roundup ranges from prospects for tax legislation this year to refunds of Cleveland’s “Jock Tax.”

 

News from the Profession. Some Audit Committee Members Just Ignoring Auditors Now (Caleb Newquist, Going Concern). Well, they’re used to it.

 

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