Posts Tagged ‘Nick Kasprak’

Tax Roundup, 8/30/2013: Same-sex joint return frenzy edition.

Friday, August 30th, 2013 by Joe Kristan

Wed in Iowa, still married in Utah.  The IRS yesterday announced that same-sex couples married legally in any state will be treated as married for tax purposes, even if they reside in a state that does not recognize same-sex marriages.

The IRS also announced that couples that married in earlier years may amend their tax returns to claim joint filing status for open married tax years.  However, they will not be required to.  Couples who extended their 2009 returns have until October 15, 2013 to file amended 2009 returns.  Otherwise, 2010 is the earliest possible open year.

The announcement cuts both ways.  If the IRS says you are married, you no longer have the option of filing as a single taxpayer.  Many couples find that marital bliss comes at a tax price.  This chart from the Tax Foundation illustrates income situations where marriage can be more costly than single status:

Marriage penalty

The opportunity for same-sex couples to choose between single and joint status for open years is unique.   This only goes one way, though; joint filers cannot amend their open years to file as single taxpayers.

Couples who have legal status short of marriage, such as “registered domestic partners” recognized in some states, are not considered married by the IRS.

Other IRS releases on the issue:

Rev. Rul. 2013-17

Frequently Asked Questions For Legally Married Same-Sex Couples  and For Registered Domestic Partners, Civil Unions

Lot’s of coverage of this in the tax blog world.  Iowa’s own Jason Dinesen has long owned this issue, and he comes through with BREAKING: IRS Releases Guidance on Same-Sex Marriage The IRS’s DOMA Guidance: How are Iowa Returns Affected?What if One Spouse in a Same-Sex Marriage Hasn’t Filed Yet? and Will Same-Sex Married Couples Be Required to Amend? 

The Tax Policy Blog has also flooded the zone:

Elizabeth Malm,  Same-Sex Marriages Recognized for Federal Tax Purposes – What Does it Mean for the States?

Nick Kasprak, State of Celebration and Marriage Penalties and Bonuses (Families with Children Edition)

Other coverage:

TaxProf, IRS Recognizes Same-Sex Marriage, Regardless of State

Kay Bell, IRS grants same-sex married couples equal federal tax filing status regardless of where in the United States they live

Trish McIntire, The IRS and DOMA – part 1

Peter Reilly, IRS Recognizes All Marriages But Not Civil Unions

TaxGrrrl, IRS Rules All Legal Same Sex Marriages Will Be Recognized For Federal Tax Purposes   

Tax Trials, IRS Recognizes Same-Sex Marriages in All States

Althouse, “All Legal Same-Sex Marriages Will Be Recognized for Federal Tax Purposes.”

Going Concern, IRS to Recognize All Same-sex Marriages, Regardless of Resident State

Linda Beale,  Same-Sex Married Couples Will be Recognized for Federal Tax Purposes Even When Moving to Nonrecognition State

The Iowa angle: IRS will recognize marriage of same-sex Iowa couples (Des Moines Register)

 

There is a little other news today:

43 percent is the new 47 percent.  And Now for the Movie: Fewer Americans Pay No Federal Income Tax (Roberton Williams, TaxVox):

The percentage of Americans who pay no federal income tax is falling, thanks to an improving economy and the expiration of temporary Great Recession-era tax cuts. In 2009, the Tax Policy Center estimated that 47 percent of households paid no federal income tax. This year, just 43 percent will avoid the tax.
That is good news, as far as it goes.  It’s not healthy to have only a minority paying income tax, the primary funding source for big government.  It’s too tempting to order a double when someone else is picking up the tab.   Mr. Williams thinks that we should count payroll taxes like income taxes, but I agree with Robert D. Flach that they’re not the same thing.

 

Tony Nitti, Tax Aspects Of The NFL Settlement Payments  “Well, if you’re a retired NFL football player, the Blue Book value has been set: your cognitive capacity is worth a cool $150,000.”

Andrew Lundeen,  Why Eliminating Taxes on Capital Would Be Good for Workers (Tax Policy Blog)

Jack Townsend, Another Israeli Bank Depositor Plea to Conspiracy

Robert D. Flach tops off a heroic week with a third Buzz!

 

Perhaps this isn’t the best way to handle an IRS exam.  Tax Analysts reports ($link) on a taxpayer who alleged that an IRS agent coerced him into sex:

Burroughs had sex with Abrahamson in September 2011 when she arrived at his home “provocatively attired,” according to the suit. U.S. Magistrate Judge Thomas Coffin concluded in the July 31 decision that Abrahamson was not acting in her official capacity, because the encounter occurred at Burroughs’s home during nonwork hours and “not in respect to the performance of official duties of the federal employee.”

One survivor of an IRS exam told me that she felt the least the IRS owed her for the experience was drinks and dinner.

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Tax Roundup, 6/27/2013: All apologies edition. And DOMA Carnival!

Thursday, June 27th, 2013 by Joe Kristan

 

Taxpayer Advocate Nina Olsen

Taxpayer Advocate Nina Olsen

Apology payments? The Taxpayer Advocate’s office issued a special report yesterday blasting the IRS treatment of 501(c)(4) exemption applications.  The report also said the IRS apparently violated the law, and its own internal procedures, by having unpublished secret internal guidance on handling the Tea Party cases.The report raises the idea of allowing the issuance of $1,000 “apology payments” for taxpayers who are mistreated by the IRS.

Not a bad start, but far better would be a “sauce for the gander” approach, where the IRS could be subject to penalties for late processing, delays and unjustified positions on the same basis as taxpayers.  If a little charity can be hit with a $100-per-day penalty for not filing a Form 990, the IRS could pay $100 per day for sitting on a 501(c)(4) exemption.  If the IRS takes an unsupported position on an examination, it should pay to the taxpayer 20% of the tax it would have collected through its bogus position.

The TaxProf has more.

Joseph Thorndike, So the IRS Hounded Liberals Too – But We’ve Still Got a Problem (Tax Analysts Blog) I still await tales left-side organization applications left to languish for years or subjected to the grilling applied to the Tea Party groups.

 

Lots of reaction to yesterday’s Supreme Court decision striking down the Defense of Marriage Act. 

Jason Dinesen owns this issue.  He has an extensive practice in Iowa same-sex married couples, and he posted up a storm yesterday:

DOMA Ruled Unconstitutional:

It means couples in same-sex marriages no longer have to jump through the following hoops to meet their tax obligations:

  1. Prepare and file separate federal tax returns as two single people and applying tax law as it applies to single people.

  2. Prepare a “mock” federal return employing tax law as it applies to married people, to see what their tax situation would have looked like if the federal government had recognized their marriage.

  3. Use that “mock” return to prepare their state return as a married couple.

Also, DOMA Done, But Complications Live On and More DOMA Musings — Married But Living in a Non-Recognition State:

IRS Revenue Ruling 58-66 says marital status is determined at the state level and does not change even if you move to a state that doesn’t recognize your marriage… But would this Revenue Ruling from 1958 regarding common-law marriage apply to same-sex couples from states like Missouri or Nebraska who drive to Iowa to get a marriage certificate but who actually live in Missouri or Nebraska, or some other non-recognition state?

The IRS will have to come out with guidance on this and other issues, including:

- A standard procedure for amended returns from same-sex couples who want to obtain joint filing benefits.

- Guidance on the mandatory nature of joint returns for same-sex married couples, and whether it is retroactive.  If same-sex married couples get to choose for open years whether to file jointly or single, is it also an equal-protection violation to deny that choice to double-sex couples?  I doubt it, but that would be fun.

Jason also offers a DOMA Tax News Roundup today.

 

Tony Nitti, Tax Implications Of The Supreme Court’s DOMA Decision: Same-Sex Couples To Be Subject To Marriage Penalty:

The Supreme Court’s ruling is clearly a victory for equality. And from a tax perspective, the decision stands to save meaningful dollars for same-sex couples who will now be defined as married for purposes of the federal estate and gift laws; because the marital deduction will now apply to these couples, spouses will be permitted to transfer assets to each other tax-free during their lifetime or at death.

Kay Bell, DOMA is dead: The effect on same-sex married couples’ taxes

Len Burman, What Will Supreme Court Decision on DOMA Mean for the IRS? (TaxVox)

Let’s assume that half of the newly recognized couples receive bonuses, which means that roughly 50,000 couples might benefit from filing amended income tax returns for 2012, 2011, and/or 2010. If all 50,000 filed amended returns for an average of 1.5 years out of the three this would yield 75,000 amended returns.

Roberton Williams, DOMA’s Demise and Federal Taxes (TaxVox)

Russ Fox, DOMA Done, But Don’t File that Joint Return Just Yet:

The US Supreme Court ruled today that the federal Defense of Marriage Act (DOMA) was unconstitutional.  That makes it appear that same-sex couples should be able to file joint tax returns.  There’s only one problem: The IRS computers likely would reject such a return if it were filed today.

TaxGrrrl, Supreme Court Rules DOMA Unconstitutional (And It Was A Tax Case!)

Nick Kasprak, Joint Filing in the Tax Code (Tax Policy Blog):

Despite the possibility of a penalty, joint tax returns generally provide tax relief, and they’re probably one of the biggest benefits that gay couples can now take advantage of (along with the estate tax exemption, which was at the center of the Supreme Court case).

Joseph Henchman, Supreme Court Decides Same-Sex Marriage Estate Tax Case (Tax Policy Blog)

Robert D. Flach, THE DEATH OF DOMA

Tax Trials, DOMA Doomed by Estate Tax Refund Claim

Linda Beale, Gay Marriage Decisions– As Expected, A Step Towards Full Civil Rights for Gays

 

In other news:

Russ Fox, Loving Appeal to be Heard on September 24th

Jack Townsend, New Taxpayer Advocate Discussion of Problems with IRS OVDI/P Program.  Still shooting jaywalkers.

Paul Neiffer, A Lease Qualifies For Like Kind Treatment But Watch the Fine Print

William McBride, Reducing Tax Avoidance by Reducing Economic Activity: New Zealand’s Failed Experiment with Ending Deferral (Tax Policy Blog)

 

Extortion Watch.  Tennessee Man Indicted for Romney Tax Return Fraud and Extortion Scheme (Department of Justice Press Release)

Legal extortion watch.   Police investigate damage to red light camera.  (Des Moines Register) It’s a tragedy that somebody might have gotten away with not quite coming to a complete stop at an empty intersection.

 

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

Monday, May 13th, 2013 by Joe Kristan

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

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

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

Another Washington Post story has this:

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

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

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

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

Megan McArdle,  Why Did the IRS Target Conservative Groups?

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

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

 

And some other coverage:

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

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

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

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

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

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

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

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

Ann Althouse has more.

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

 

In other news:

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

 

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

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

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

 

Trish McIntire,  Max and Dave Looking for Reform

Nick Kasprak,  Do Tax Cuts Pay for Themselves?

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

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

 

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

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

 

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

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

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

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

 

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

20130512-1

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

 

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

Monday, April 22nd, 2013 by Joe Kristan

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

 

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Iowa is #6.

 

 

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

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

Not every LLC member can obligate an LLC.

 

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

 

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

 

Jim Maule,  The “Rain Tax”?

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

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

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

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

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

 

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

 

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

Tuesday, April 2nd, 2013 by Joe Kristan

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

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

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

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

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

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

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

 

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

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

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

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

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

 

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

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

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

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

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

 

Russ Fox,  Bozo Tax Tip #9: Foreign Trusts

Paul Neiffer,  The Two Week Check List

Missouri Tax Guy,  Residential Energy Tax Credits 2012

William Perez,  Tips for SEP-IRA Contributions

 

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

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

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

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

 

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

 

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Tax Roundup, 3/27/2013: Iowa leads the nation! In high corporate tax rates. And: film scam? No prize for you!

Wednesday, March 27th, 2013 by Joe Kristan

We’re number one!  Weekly Map: Top State Corporate Income Tax Rates (Nick Kasprak, Tax Policy Blog):

Via Tax Policy Blog.

Just another dubious leadership role for Iowa.

 

 

Monday Open Thread: The Tax Man Cometh(The Other McCain).  If you were tax dictator, what would be the first bad tax law to go?  I would get rid of (in order) The AMT, Section 409A on deferred compensation, and the new net investment income tax.  But there are so many worthy candidates…

 

Philip Panitz, guest-posting at Janet Novack’s blog,  How Real Estate Investors Can Protect Themselves From The IRS:

So save all your expense receipts, try to keep a log, and try to stay friendly with—and maintain contact information for—workers and tenants. You might, for example, need to call as a witness a gardener who can say he got his instructions directly from you instead of a real estate company.  And maybe the guy who is always grousing about his plumbing needing fixing or the woman who wonders why the gardener missed a spot in his watering will be asked to testify that they kvetched to you —not a real estate agent–when the toilet needed fixing.

 

U.S. film festival cancels award to UK film after tax scamPerhaps the least of actress Aoife Madden’s problems, considering the 54 month prison sentence she got out of it.

 

Jason Dinesen,  Married Filing Separately, Iowa Tax Returns & Itemized Deductions — Am I Missing Something?  On the quirks of Iowa’s separate-combined filing status.

Roberton Williams, DOMA’s Tax Hassles for Same-Sex Couples

 

Clint Stretch,  Which Kind of Imbalanced Solution Do You Want?  (Tax.com).  Mr. Stretch is, or maybe was, a career lobbyist for a national accounting firm that I once worked for.  Considering that his career involved crafting loopholes, this is a fascinating observation (my emphasis):

I am no fan of spending through the tax code. Tax expenditures are government grants with the barest of qualification criteria administered by an agency with no subject matter expertise when it comes to the purpose of the incentive.  The incentives – from business tax credits to mortgage interest deductions – may influence behavior at the margins,
but many of the beneficiaries are rewarded for doing what they were going to do anyway.  Like direct spending; tax expenditures are spending and individuals do benefit.  Although a rate reduction or a fiscally sound government might cushion the blow, reducing tax expenditures will be another spending cut that takes resources away from affected taxpayers.  We should stop talking about spending versus taxes.  Instead, we should work on how to make reasonable, holistic reductions in major areas of government influence. 

That’s why I think he must have retired.  I don’t think he could say stuff like that if he were still lobbying.

 

Joseph Thorndike : Why the Tea Party Should Support Soda Taxes.  Because it would really annoy people, leading to a tax revolt.   It sounds like an underpants gnome approach to me.

Jack Townsend, IRS Identifies Its Dirty Dozen Tax Scams for 2013

Principles of the tax law.  Heads They Win – Tails You Lose (Paul Neiffer).  The Obamacare tax on wage income cannot be offset with farm losses.

TaxGrrrl,  All I Needed To Know About Taxes I Learned From My Kids

 

No, no, that’s not how it works, Senator.  You’re supposed to give them money.  Bored Politicians Taxing Strippers (David Brunori, Tax.com)

Group that stands to benefit from government spending calls for government spending.  (Radio Iowa)

Now the IRS is in trouble. William Shatner ‘appalled’ at IRS Star Trek video spoof (Kay Bell)

News you can use.  If You’re Failing the CPA Exam, You’re Not Making the Most of Bathroom Breaks (Going Concern)

 

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

Tuesday, March 12th, 2013 by Joe Kristan

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

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

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

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

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

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

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

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

Related: Daniel B. Evans, The Tax Protester FAQ

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

 

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

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

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

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

 

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

Missouri Tax Guy, Is that Gift Taxable?

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

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

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

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

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

 

Tax News from the Animal Kingdom.

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

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

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

 

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

 

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Tax Roundup, 2/26/2013: A map of state tax futility. And why bankers don’t like OREOs.

Tuesday, February 26th, 2013 by Joe Kristan

Close enough to zero. Monday Map: Corporate Income Tax Revenue as a Percentage of All State/Local Tax Revenue (Nick Kasprak, Tax Policy Blog):

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IRS Field Attorney Advice: Bank must capitalize indirect costs of holding “OREO” property under inventory capitalizetion rules.  From FAA  20123201F (my emphasis)

Section 263A applies to property that is acquired for resale. If § 263A applies, the taxpayer must capitalize both the direct costs of acquiring the property and the property’s allocable share of indirect costs.

In this case, X clearly acquires OREO in foreclosure (or in lieu of foreclosure) with an intent to resell the property. Bank regulators restrict the holding period for OREO and expect banks to exercise good faith efforts to sell the property. As required by applicable state and federal policies and regulations, it is our understanding that X advertises its OREO properties for sale, including those properties which it rents out. X’s Year6 Annual Report confirms that assets acquired through (or in lieu of) foreclosure are held for sale. In addition, OREO is acquired and held in the ordinary course of X’s trade or business. X’s Year6 Annual Report acknowledges as much when it states that X may foreclose on and take title to properties securing loans “during the ordinary course of business.” X engages in OREO transactions with frequency, regularity, and according to an “OREO disposition strategy.” (Year6 Annual Report, p.17). Thus, the OREO held by X constitutes property held by the taxpayer primarily for sale to customers in the ordinary course of its trade or business.

“OREO” is “other real estate owned,” for you non-bankers.  Bankers don’t care to hold much of that.

 

Joseph Henchman,  Nebraska Governor Withdraws Tax Reform Proposal; Legislature Look to Commission to Develop Alternatives (Tax Policy Blog).  But they aren’t giving up on tax reform.  So should Iowa.  The Quick and Dirty Iowa Tax Reform Plan is tanned, rested and ready!

Paul Neiffer,  Must Have W2 Wages to Deduct DPAD.  A hidden tax trap for the Schedule F farmer.

 

Great minds think alike:

TaxGrrrl,  How Will Your State Be Impacted By Sequestration?

Kay Bell,  How would your state fare under sequestration?

 

TaxProf,  3d Circuit Denies CARDS Tax Shelter.  Another turn-of-the-century tax shelter fails.

Elaine Maag, Education Tax Credits Rival Pell Grant Program in Size: Reforms Proposed (TaxVox).  The more you subsidize it, the more it costs.

Jeremy Scott, Taxing the Rich, Thenardier-Style (Tax.com):

But the influence of Les Miserables doesn’t just extend to the silver screen and stage. President Obama seems to be taking tax policy advice from the musical’s comical antagonist, Thenardier.

Well, that would explain many things.

Trish McIntire,  Referrals – A Double Edged Sword.

Peter Reilly,  What Were They Thinking ?   Another example of the unwisdom of failing to remit payroll taxes.

Linda Beale,  Private equity and real estate managers get a “costly and unjust [tax] perk”.  Not really, but some people really hate carried interests.

Me: Identity theft tax fraud: women’s work?

 

Put the champaign back on ice.  The Income Tax is NOT Turning 100 – Yet. (Joseph Thorndike, Tax.com).

One less metal home in town.  Demise of Another Lustron House.  (IowaBiz.com) These are funky steel houses, not mobile homes.  They don’t build ‘em like that anymore.

 

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Tax Roundup, 2/15/2013: Governor couples Iowa taxes to fiscal cliff bill. Also: 19 years for municipal thief.

Friday, February 15th, 2013 by Joe Kristan

20130117-1Governor Branstad has signed the bill conforming Iowa’s tax law to federal changes enacted last month.  The Governor signed SF 106 yesterday afternoon.

The bill allows taxpayers to use several federal provisions in computing their 2012 Iowa taxes, including:

- The federal Section 179 deduction of up to $500,000.

- The federal above-the-line deductions for tuition and educator expenses.

- The exclusion for IRA distributions to charity for taxpayers who have reached age 70 1/2, and the transitional rules for January 2013 charitable rollovers of IRA distributions.

- The optional deduction for state and local sales taxes.

The bill does not conform Iowa to federal bonus depreciation; Iowa filers will normally use federal standard MACRS depreciation instead.

 

Tony Nitti,  Senate Proposal for Tax Reform Part II: Democrats Seek To End S Corporation Payroll Tax Loophole.  It’s similar to nonsensical proposals put forward in prior years to tax S corporation K-1 income when 75% or more of revenues are “attributable” to three or fewer shareholders — an impossible standard to evaluate in many cases, and one that discriminates against the smallest S corporations.  It shows they are lazy — the problems with the approach are well known, yet the won’t make the effort to correct, instead trotting out the same old bill.  It just shows they aren’t serious.

David Cay Johnston finds the cuts to IRS funding that would result from the impending sequester “Particularly Devastating” (Tax.com)

 

Going Concern,  Former Dixon Comptroller Rita Crundwell Gets Nearly 20 Years.  She stole over $50 million from an Illinois municipality of 15,000 people going back to 1990.  And nobody noticed for over 20 years.

Kay Bell,  IRS’ Where’s My Refund? site swamped by impatient refund tracking taxpayers.

Taxpayers overwhelmed with compliance demands, asks government to slow down.  IRS Overwhelmed With Refund Requests, Asks Taxpayers To Slow Down(TaxGrrrl)

Paul Neiffer, Another Bill to Reduce Farm Payments is Introduced!

Jack Townsend, Swiss and US Sign IGA.  An agreement under the “FATCA” foreign bank reporting rules.

Patrick Temple-West, Married couples face tough taxes, and more (Tax Break)

Russ Fox, Nevada Looks to Tax Online Poker Tournaments

Donald Marron,  The Balanced Budget Amendment’s $300 Billion Error

News you can use.  Retire Rich: The Forbes 2013 Antiretirement Guide (Janet Novack)

Nick Kasprak,  Happy Valentine’s Day! Will You Marry Me (For Tax Reasons?) (Tax Policy Blog).

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Some people are just incurable romantics!

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Tax Roundup, 2/5/2013: Iowa conformity bill clears Senate. Also: the uses of GPS navigation!

Tuesday, February 5th, 2013 by Joe Kristan

20130117-1The Iowa Senate approved the Iowa tax code conformity bill, SF 106, yesterday.  The bill was approved 48-0, which is a good sign that it will pass quickly — enabling Iowans to get on with filing their 2012 business returns.

The bill updates Iowa’s income tax for the Fiscal Cliff tax bill changes passed last month by Congress.    Key items updated to match federal rules include:

- Conforming with the $500,000 federal Section 179 deduction limit for 2012 and 2013.

- Allowing the optional deduction for state and local sales taxes for 2012 and 2013.

- Conforming to federal research credit rule changes

- Continuing the IRA charitable distribution exclusion

- Adopting the federal “above the line” deductions for college tuition and for out-of-pocket expenses of educators.

The bill does not adopt federal bonus depreciation for 2012 and 2013.  The bill does not show up yet on the calendars for the House Ways and Means Committee or for House floor debate, so it may not get to the Governor this week.  Update, 9:00 am: An e-mail from the House floor manager for the bill says the House may take it up as soon as tomorrow.

 

More boffo reviews for the shutdown of the IRS preparer regulation program! 

The Weekly Standard raves:

It’s hard to choose just one IRS knee-slapper, but here goes. The agency insists IJ’s “suggestion that the return preparer program is the product of a tainted lobbying effort is belied by support for the program from the Taxpayer Advocate, the Electronic Tax Administration Advisory Committee, numerous consumer advocacy groups, and comments from individual practitioners.”
The ETAAC is an IRS-administered panel whose members include lawyers and CPAs—who weren’t subject to the regulations—and people with connections to H&R Block and Jackson Hewitt, big businesses happy to help the government force the little guys out of the industry.

Protecting the taxpayers has never been the point.

The Wall Street Journal weighs in:

Rather than continuing to fight in court, the agency would do better to cashier the rules on legal and economic grounds. They are a classic example of big business harnessing government power to aid the powerful at the expense of small-business competitors. Meantime, won’t someone in Congress tell the IRS to stop exceeding its legal authority?

Sadly, no.

Meanwhile, the IRS has re-opened its PTIN registration system. It appears the IRS will still charge for them, though it’s not clear why anymore.

 

Nick Kasprak, Weekly Map: Sources of State and Local Tax Revenue: Sales, Excise, and Gross Receipts Tax:

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Leave Gennifer Flowers Alone!  Clinton woman pleads guilty to false tax returns.  Clinton, Iowa, that is.  From the Clinton Herald:

Regina Jimenez, 60, of Clinton pleaded guilty to two counts of filing
false tax returns. She faces up to three years of prison, a fine of up
to $1 million and costs of prosecution on each count.

According to court documents, Jimenez operated AA Accounting & Tax
Services, Inc. in Clinton from approximately 2007 through 2011. Jimenez
used the business to facilitate the theft of more than $200,000 from a
client who believed that Jimenez would use the money to pay the client’s
taxes.

There’s never a good reason to have your tax preparer pay your income taxes for you.  If your preparer tries to get cash from you “to give to the IRS,” ask many questions.

 

Paul Neiffer, Hedging Versus Speculation:

Remember, if the farmer purchases a corn call option as part of this hedging strategy, this no longer qualifies as a hedge (even though is a normal strategy of selling actuals and buying the “board”, for tax purposes, it is not a hedge)  and is considered speculation.  In many cases, the tax treatment can be harsh since if the option produces income, the IRS will treat it as ordinary and if it produces a loss, it will be considered a capital loss (the worst of both).

 

Because partnership tax isn’t screwed up enough?    Why the IRS Should be Taxing the Profits of Private Equity Funds as Ordinary Income (Steven Rosenthal, TaxVox).

Robert D. Flach, tax man of La Mancha New Jersey Pennsylvania, chases his favorite windmill: BEFORE I GO – MY “CRUSADE”

Windmills everywhere!  Carl Levin Continues to Play the Role of Don Quixote (Jeremy Scott, Tax.com)

Patrick Temple-West,  Democrats target corporate tax breaks, and more

TaxGrrrl, Guess What Turned 100 This Weekend?

Kay Bell,  Happy 100th birthday federal income tax

Brian Strahle,  The Maryland Wynne Case is Decided, Will The State Appeal Further?  A possible refund for Maryland residents with taxes in other states.

Brian Mahany,  OVDI – It’s Not Just For Unreported Foreign Accounts

 

Why you should spring for a good GPS unit.  You might get lost otherwise, like a star-crossed couple in my home town of West Des Moines.  The Des Moines Register reports:

The incident occurred at about 2:12 a.m. Friday, when a car pulled into a police station driveway at 250 Mills Civic Parkway marked for “Authorized Personnel,” according to a police report.

Police said the car passed two patrol cars and drove up a private drive before turning around when it reached a garage. An officer in one of the patrol cars then turned on his top lights and stopped the car.

The driver told officers they were trying get to Beach Girls, an adult entertainment venue at 6220 Raccoon River Dr., West Des Moines, according to the report.

The two officers reported that both the driver and passenger had bloodshot, watery eyes and that the vehicle smelled of marijuana.

If they mistook the West Des Moines cop shop for a strip club, either they already had enough fun for the night, or strip joints have changed a lot since my bachelor days.

 

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Tax Roundup, 1/15/2013: Branstad not leading on income tax reform. And: Cage Fight! CPAs vs. RTRPs!

Tuesday, January 15th, 2013 by Joe Kristan
Via Wikipedia

Via Wikipedia

Might the Iowa legislature lead on income tax reform?  If it’s going to happen, they will have to, as Governor Branstad only wants to talk about property taxes this year.  O. Kay Henderson reports:

During a recent interview with Radio Iowa, Governor Branstad made it clear he is focused on cutting property taxes.

“Sure, I’d like to see the income tax reduced, too, but in terms of my priority — and I’ve been working on this for a couple of years and we’re really trying to perfect it — our focus is going to be on significant property tax reduction and replacement,” Branstad said a month ago.

Some legislators are more ambitious, reports Henderson:

Representative Tom Sands, a Republican from Wapello, is the chairman of the House Ways and Means Committee that writes tax policy.

“I think there is some pressure building from Iowans to cut both income taxes — look at some reform as well as a cut to the individual income tax,” Sands says. “We’re hearing from corporations as well, on the income side.”

I doubt anything good will happen with income taxes this session.  The Iowa Chamber Alliance even wants to to go the wrong way, pushing more tax credits for the well-connected.  No organization seems to be pushing for the rest of us.  But The Quick and Dirty Iowa Tax Reform Plan is ready to go if the legislature needs some ideas.

 

Russ Fox, Estimated Tax Payment Deadline Is January 15th.  For 1040 and 1041 filers. Kay Bell has more.

 

Nick Kasprak, Monday Map: State Gasoline Tax Rates, 2013 (Tax Policy Blog):

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Robert D. Flach, CHOOSING A TAX PREPARER.  I suppose I should be upset by this:

Contrary to the popular “urban tax myth” perpetuated by uninformed journalists, just because a person has the initials “CPA” after his/her name does not mean that he/she knows his arse from a hole in the ground when it comes to preparing 1040s.

But I’m not.  It’s true, if roughly stated.

Robert goes astray in his next paragraph:

Only those individuals who possess the “EA” (Enrolled Agent) or “RTRP” (Registered Tax Return Preparer) designations have demonstrated competency in 1040 preparation by taking an IRS-sponsored test, and are required to remain current in 1040 law by taking a minimum number of hours in continuing professional education (CPE) in federal income taxes each year.

False.  The RTRP test is open book.  It demonstrates that somebody can read.  It’s a literacy test, an empty exercise to justify the IRS power grab over the preparer industry.  It’s different with Enrolled Agents, like Jason Dinesen and Russ Fox,  who have to meet much stricter standards than RTRPs.    One of the underreported nasty consequences of the RTRP designation is that it damages the EA brand.

I also disagree with the implied conclusion that CPAs who prepare returns are less competent as a group than EAs or RTRPs.  Some are incompetent, no doubt, but many tax CPAs are highly-skilled.    I think the competency curve for non EA preparers vs. CPAs would look something like this:

http://www.rothcpa.com/misc/20110118-2.png

Substitute “RTRP” for “unenrolled preparer.”

There are excellent non-CPAs and there are incompetent CPAs.   Still, I think as a group the CPAs who do tax for a living will tend to be more competent.

My rule of thumb for choosing a preparer: buy as much preparer as you need, but no more.  Many taxpayers who only have wage and investment income and routine itemized deductions will do fine with an RTRP (and would have done fine with an unenrolled preparer without the new IRS preparer regulations).  If you have business income, a multistate return, or a complicated financial life, your needs go up; you need a high-end RTRP like Robert, or an EA, or a CPA. As your business gets bigger, you are more likely to want to hire a good CPA.  And when Robert gets to the bottom line of his post, I think he agrees.

But be careful which one you hire: Lawyer, Accountant Implicated in Estate Fraud Case (Brian Mahany)

 

Trish McIntire, Preparer Conflict of Interest

 

Jack Townsend, The Big Boys Get Better Treatment in Our Tax System Than Do Minnows.

I speak again on the basic relative unfairness of the treatment of many, if not most, in the IRS’s offshore voluntary disclosure initiatives.

They have to shoot the jaywalkers so they can slap the real offenders on the wrist.

 

You pay more in taxes this year than last year.  How do you like your tax cut? At Tax.com, Jeremy Scott tries to convince us that we just got a tax cut:

 The income tax rates, the estate tax, and the alternative minimum tax  patch are all here to stay.  And, according to the Tax Policy Center’s (TPC’s) preliminary study on distributional effects, the act essentially provided a big tax cut for almost everyone.

Funny, everybody’s taking home less.  How does that work? My emphasis:

Using the Congressional Budget Office’s old baseline (which assumed that  the Bush tax cuts would expire for everyone) and looking at the effects of the tax cut in 2018, the TPC says that the average taxpayer will receive a $2,335 tax cut under ATRA

I see.  Because the tax increase could have been bigger, we got a tax cut.  I’ll see if I can cut staff accountant pay and convince them they got a raise because we didn’t cut more.

Janet Novack, Obama Vows Republicans Won’t Collect ‘Ransom’ For Raising Debt Limit.  No, they’ll ultimately let the President continue the insane spending pace.

 

Paul Neiffer, We Wonder What the Investment Income Tax Form Will Look Like

Avoiding Excess Credit Card Interest Should Not Be A Taxable Event.  But it can be, if you get the bank to forgive unpaid interest that would be non-deductible.

IRS Releases Additional Inflation-Adjusted Figures for 2013

Robert Goulder, Taxes & Corruption: Another Greek Tragedy (Tax.com)

TaxGrrrl, Ask the taxgirl: IRS Delayed Tax Filing Season Applies To Everybody

Martin Sullivan, IRS: Women At Work (Tax.com):

According to the latest IRS Data Book  60,623 of the agency’s 104,402 employees in 2011 were women. That 66 percent is far more than the 44-percent figure for government’s total civilian labor force and the 47-percent figure for the overall US civilian workforce.

 

Ben Harris, Should Louisiana Dump Its Income Tax for a Bigger Sales Tax? (TaxVox)

News you can use.  FYI: Attorneys Think Auditors’ Legal Confirmation Letters Are a Giant Waste of Time (Going Concern)

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Tax Roundup, 1/11/2013: No, they aren’t paying attention. And it only gets harder.

Friday, January 11th, 2013 by Joe Kristan

20130113-3Don’t forgive them, because they have no idea what they’re doing.  Last night I taught a session on the Fiscal Cliff tax law and the Obamacare Net Investment Income tax to Iowa chapters of the Institute of Management Accountants over the Iowa Cable Network.  Using the controls to talk to remote classrooms in Marshalltown, Dubuque, Marion and Cedar Falls was a challenge, but a piece of cake compared to working with the tax law.

When they passed the Net Investment Income Tax as part of Obamacare, there were only two concerns for the guilty congresscritters:

- Did it apply only to “the rich,” as defined that day?  and

- Did it raise enough revenue for them to help them pretend that they weren’t raising the deficit?

Nobody who voted for the bill took the time to ask: “should we really set up an all-new tax, unlike anything we have ever done before, requiring all new regulations and recordkeeping requirements, just to collect 3.8% of something?”  And that’s exactly what they did.

If you have any illusions that they have any clue what they are doing, a look at the new bracket schedule for 2013 for single filers should cure you of that:

If taxable income is:                 The tax would be:
--------------------                  ----------
Not over $8,925                       10% of taxable income
Over $8,925 but not                   $892.50 plus 15% of the
  over $36,250                           excess over $8,925
Over $36,250 but not                  $4,991.25 plus 25% of the
  over $87,850                           excess over $36,250
Over $87,850 but not                  $17,891.25 plus 28% of the
  over $183,250                          excess over $87,850
Over $183,250 but not                 $44,603.25 plus 33% of the
  over $398,350                          excess over $183,250
Over $398,350 but not                 $115,586.25 plus 35% of the
  over $400,000                          excess over $398,350
Over $400,000                         $116,163.75 plus 39.6% of the
                                         excess over $400,000

Notice something funky about that 35% bracket?  It covers only $1,650.  While you have to earn $215,100 to get through the 33% bracket, you skip through 35% to 39.6% with only $1,650 of additional income.  Why?  Because the administration wanted to only tax “the rich,” and they decided for that day that “rich” starts at $400,000 income, if you are single.

The only sure cure is to make congresscritters, the President, and the Cabinet prepare their own returns in a live webcast, with a comment bar for viewers to mock them.  It would serve them right if they had to do it a la Robert Flach, with no computer.

 

TaxGrrrl,  Tax Code Hits Nearly 4 Million Words, Taxpayer Advocate Calls It Too Complicated:

What could you do with six billion hours?

Think hard. That’s the equivalent of 8,758 lifetimes. Yes, lifetimes.

It’s also how much time taxpayers spend every year trying to comply with tax filing requirements. That, according to the 2012 annual report as prepared by the National Taxpayer Advocate Nina E. Olson.

It’s not getting easier, either.

Martin Sullivan, Tax Reform Muddle (Tax.com):

Having agreed to tax increases, Republicans are now more insistent than ever that tax reform must be revenue neutral.

The big change is from Democrats– who have become so adamant on the need for tax increases in addition to the $600 billion raised by the fiscal cliff deal, and who realize additional rate hikes are absolutely impossible–are hell-bent on preserving the most politically feasible loophole closers for raising revenue.

It’s a hopeless game.  The deficit is too big to deal with by “loophole closers.”  Behind the push to raise taxes by closing loopholes is a delusion that you can pay for our incontinent government spending just by hitting “the rich” harder.  But the rich guy can’t cover the check.  Either spending comes down or everyone pays a lot more tax.

 

 

Nick Kasprak,  Chart: Effects of Marriage on Income and Payroll Tax Liability (Tax Policy Blog)

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Deborah Jacobs, A Married Couple’s Guide To Estate Planning (Forbes, via the TaxProf)

Paul Neiffer, Section 179 Can Create a Farm Loss (In Certain Cases)

Kay Bell,  Top taxpayer problem? Continuing tax code complexity

Christopher Bergin,  Permanent Insanity: “Only in Washington would you find folks who would brag that they did a good thing by making permanent an unfair and indecipherable tax system that wastes billions of dollars to administer.” (Tax.com)

Norton Francis, What the Fiscal Cliff Deal Means for the States (TaxVox):

The good news for states is that American Tax Relief Act of 2012 will  end much of the uncertainty that has plagued the income tax code in recent years. No longer will states have to guess what will happen to many provisions of the federal revenue code that were set to expire. The bad news is some states will lose revenue they were counting on from
scheduled changes in the federal estate tax that won’t happen.

Trish McIntire, Refund Loans

Patrick Temple-West,  Public goals, private interests in ‘Fix the Debt’ campaign, and more

Jack Townsend,  Bank Leumi Signals Cooperation with U.S. on Offshore Accounts.  Israili bank ready to spill the beans on U.S. taxpayers with accounts there.

A Friday Buzz from Robert D. Flach.

The Critical Question:  Shipping Wars’ Token Hot Chick Is a Former Accountant? (Going Concern)

 

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Tax Roundup: 1/8/2013: Iowa to issue mortgage credit certificates. And: got change for a trillion?

Tuesday, January 8th, 2013 by Joe Kristan

 

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Dave Jamison

Iowa issuing new certificates for federal mortgage interest tax credits.  The Iowa Finance Authority yesterday announced that it will issue mortgage credit certificates that enable Iowans to qualify for the federal mortgage interest credit.  O. Kay Henderson reports:

The Iowa Finance Authority is offering a new tax credit for new homeowners who fall under limits on annual income and the purchase price of their home. Iowa Finance Authority director Dave Jamison says it’s a credit linked to the mortgage interest new homeowners are paying.

“Yet another way that Iowans who meet our program guidelines can experience the many benefits of home ownership,” Jamison says.

Iowans with the certificates may be able to claim the federal credit on Form 8396.  The IRS describes the credit here.  They note that interest that qualifies for the credit does not qualify for the home mortgage deduction.  You only qualify for the credit if you have a mortgage credit certificate from a qualifying agency; in Iowa, that agency is the Iowa Finance Authority.

The credit isn’t for everyone; there are limits based on income and home price.  From the O. Kay Henderson story:

Eligibility guidelines are different for each Iowa county. In the state’s largest county, Polk County, a couple with an annual income of up to $75,000 could qualify for the credit on a home that was purchased for $250,000 or less.

More from  WHOTV.com.

 

Nick Kasprak, Monday Map: Percentage of Taxpayers with AGI over $500,000 (Tax Policy Blog)

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Fiscal Cliff Notes

TaxGrrrl,  IRS Issues Statement On Tax Legislation, Makes No Promises About Start Of Tax Season:

The delay means that now, there are a lot of new forms to be printed, a lot of software programs to finagle. I’d be surprised – and wildly impressed, mind you – to see tax season kick off on time this year for all taxpayers. But fingers crossed, right?

I think the federal tax season won’t be too bad.  With all of the retroactive conformity problems in the new law, though, a lot of states are likely to give taxpayers fits.

Kevin D. Williamson,  You Cannot Raise Taxes on the Rich:

Tax hikes on the so-called rich may decrease the private sector’s share of income, but they probably will not do much to decrease the real income of high-wage workers and may in reality increase government revenue at the expense of low-wage workers in the long term, though it is very difficult to disaggregate the complex relationships between taxes, wages, and prices. But those who say that they are most interested in economic inequality would do well to follow Kenworthy’s example and look at transfers rather than taxes.

James Pethokoukis,  New study undercuts Obama’s income inequality argument

Washington’s tax hike on wealthier Americans won’t accelerate economic growth, won’t create jobs, and won’t lower the debt by an more than a rounding error. So what was the point of all that debate about the fiscal cliff? Why did President Obama insist on those upper-income tax increases, especially when the economy continues to struggle?

Simple: It was a way — even if mostly symbolic — of addressing what President Obama views as America’s biggest problem: rising income inequality.

A falling tide lowers all boats.

Freakonomics,  How Much Financial Inequality Is Due to Financial Illiteracy?  Is that illiteracy of the people who are unequal, or those who think it’s a big deal.

Jeremy Scott, Both Parties Should Have Pushed Payroll Tax Cut (Tax.com)

 Hani Sarji,  More Estate Tax Changes Could Follow Fiscal Cliff Deal (via the TaxProf)

Patrick Temple-West, More tax revenue to IRS before cliff, and more

 All the talk about the fiscal cliff and the inadequacy of the last-minute deal to avert it obscures one fact: It probably provided the government with tens of billions of dollars in unexpected tax receipts.

Many taxpayers accelerated income and deferred deductions anticipating the rate increases.

Wall Street Journal, The Stealth Tax Hike: Why the New $450,000 Income Threshold Is a Political Fiction:

Paul Neiffer, Fiscal Cliff Tax Bill May Increase Divorce Rate!

 

Russ Fox,  The Problem with PEOs.  No, not these PEOs.

Trish McIntire, More ITIN Info

Missouri Tax Guy,  Married Filing ….

Jack Townsend, HSBC Depositor Pleads Guilty to Conspiracy

Kay Bell, Tax moves to make in January 2013

I like the first half. Let There Be Wine (And Taxes)  (Jason Dinesen)

The Critical Question: Can You Distinguish a Tax from a Ransom Payment? (Robert Goulder, Tax.com)

I wasn’t serious about her anyway.  Ex-KPMG Chief to Auditors: You Are All Flirting With Irrelevance  (Going Concern)

Hope and change.  A lot of change, if you use it to buy coffee.   Should the President Mint a $1 Trillion Platinum Coin? (Megan McArdle)

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Tax Roundup, 1/4/2013: How many seconds of federal spending do you cover? And more debris from the bottom of the Fiscal Cliff.

Friday, January 4th, 2013 by Joe Kristan

20130104-1Spending, by the numbers.  Local radio guy Brian Gongol asks, Why do we baffle ourselves with huge numbers instead of talking about budgets in per-person terms?  Why, indeed?  You could ask 100 people on the street how much money the government spends and how big the deficit is, and you would be lucky to get the size of the budget within a trillion dollars.  The numbers are hard to comprehend.

The ability of the politicians to get away with talk about “millionaires and billionaires” proves this — a billion is 1,000 million, and while there are likely people on your street with a net worth of $1 million, you probably haven’t met anybody worth $1 billion.  They aren’t remotely the same thing.

In doing year-end tax projections for a client with a once-in-a-lifetime gain from a business sale and a huge resulting tax liability, I wondered how long his enormous (to me) liability would keep the government running.  Dividing the 2012 fiscal year spending of $3.796 trillion by the 31,536,000 seconds in a 365-day year, I figure that the federal blob spends $120,370.37 per second.  The biggest tax liability I’ve ever seen comes well short of funding 2 minutes of government operations.  I probably will never cover a second.  Where do you fit?

 

Fiscal Cliff Webinar!   I will be appearing with Roger McEowen on the “Tax Notes From the Fiscal Cliff” webinar at Noon January 14.  We will be covering the new legislation and the proposed 3.8% “Net Investment Income Tax” regulations.  Register today!

 

The IRS has published new withholding tables for the Fiscal Cliff Legislation (Accounting today)

 

Fiscal Cliff Notes:

Wall Street Journal:  Cliff Fix Hits Small Business; Many Small Entities or Firms May Face Higher Taxes This Year After the Deal

David Henderson, Pssst:  Someone tell the Republicans they won:

So here’s the big news: the anti-tax side won.  Sure, Obama would love
to raise taxes even more, especially on people making between $200K and $450K.  But now he has almost zero leverage to do that. 

I think that’s about right.  And now the President has lost his ability to distract attention from the ongoing fiscal calamity with arm-waving about “millionaires and billionaires.”

Derek Thompson, Sorry, Middle Class: In a Few Years, Your Taxes Will Have to Go Up, Too (via Going Concern).  You know, we could try spending less.  In any case, the rich guy isn’t buying.

Tim Carney: How corporate tax credits got in the ‘cliff’ deal

Katrina Trinko, Hollywood, Electric Scooters Benefit From Tax Breaks in Fiscal Cliff Bill (The Corner)

Brad Plumer, From NASCAR to rum, the 10 weirdest parts of the ‘fiscal cliff’ bill (Wonkblog, via Tyler Cowen).

Chris James, Fiscal Cliff Deal Adjust Capital Gain Rates and Qualified Dividend Rates (Davis Brown Tax Law Blog)

Paul Neiffer, Some More Goodies Buried in the Fine Print

Kay Bell, Redefining ‘wealthy’ for tax purposes

Tax Trials, Fiscal Cliff Legislation – American Taxpayer Relief Act of 2012

Patrick Temple-West, Cliff fix hits small business, and more

Nick Kasprak, 2013 Tax Brackets (Tax Policy Blog)

Roberton Williams, TPC Tax Calculator Shows What Avoiding Fiscal Cliff Means for Taxpayers (TaxV0x)

Howard Gleckman,  What the Fiscal Cliff Deal Really Means for Taxes and Spending

TaxProf,  More Fiscal Cliff Tax Commentary

 

In other news…

Jack Townsend, Wegelin & Co. Pleads Guity to Conspiracy

Lynnley Browning, Swiss bank Wegelin to close after guilty plea.  They opened in 1741.

Jason Dinesen, Tax Predictions for 2013

Trish McIntire, Disclosing Prisoner Returns

Taxdood, Intrastate iGaming: Federal Reporting and Withholding Tax Obligations

Robert D. Flach, WTF IS THIS AMT EVERYONE IS TALKING ABOUT?

News you can use: “Have Fun and Don’t Be Bored” (Brian Strahle)

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Tax Roundup, 12/31/2012: No cliff deal yet. And Branstad won’t try to fix income tax this year.

Monday, December 31st, 2012 by Joe Kristan

No cliff deal.  As of this morning, the President and Congress continue to fail to to make a “fiscal cliff” deal.  Rest assured, though, that even when they cobble together a lame and harmful deal, as they will today or weeks from now, they won’t even begin to address the real fiscal calamity — the government’s incontinent spending.

The unforgivable sin of the current president, and the last one, and their Congressional enablers, is spreading the idea that the government can buy us all free stuff, and the rich guy will pick up the tab.  Sorry.  The rich guy isn’t buying.

 

Income taxes: the redheaded stepchild of Branstad tax policy?  It looks more and more like the Branstad agenda for the 2013 Iowa legislative session  won’t include income tax reform.  From the Sioux City Journal:

Asked during a recent interview if there was room in all that for income tax reductions during the 2013 session, Branstad replied: “Probably not.”

“Honestly, property tax would be my priority and I’d love to do income tax, too, and maybe, if revenues exceed expectation, we could provide some income tax relief in addition,” Branstad said. “But I think I would rather focus and get something permanent done on the property tax. That’s the place where we’re the least competitive.”

That’s a shame.  Given the economically unwise attitude of the Senate leader, maybe nothing is possible:

Senate Majority Leader Mike Gronstal, D-Council Bluffs, said he would need more details but at first blush he doubted it would go very far in the legislative process if it proved to be “just a way for the wealthiest Iowans to cut their taxes dramatically” while middle-class families picked up a greater share of the tab for the cost of state government.

That’s just silly.  The rich guy isn’t buying for Iowa either.  The wealthiest Iowans always can dramatically cut their taxes with a moving van, until Senator Gronstal figures out a way to keep them from escaping to zero-tax South Dakota or Florida.

Iowa’s income tax is way overdue for replacement.   Instead, it will get more Bondo and bumper stickers.

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

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

 

Fiscal Cliff Notes:

Greg Mankiw, New York Times:

When President Obama talks about taxing the rich, he means the top 2 percent of Americans. John A. Boehner, the House speaker, talks about an even thinner slice. But the current and future fiscal imbalances are too large to exempt 98 percent or more of the public from being part of the solution.       

Ultimately, unless we scale back entitlement programs far more than anyone in Washington is now seriously considering, we will have no choice but to increase taxes on a vast majority of Americans.

Think Finland.  Unless we choose to be Greece or Argentina.

Gongol: Fiscal Cliff…not resolved. I note a false choice:

The people who make the decisions at the highest level in this republic are either dishonest or utterly economically incompetent if they don’t say the following out loud: “We are demanding more out of our government than we can presently afford. We need to pay more, get less, or both.”

“Either?”  I say “both.”

Kay Bell: Senate ready for some football; adjourns Sunday without reaching fiscal cliff deal

TaxGrrrl, Budget Talks Stall As Reid Calls Latest GOP Move A ‘Poison Pill’

Kevin Drawbaugh, Fiscal cliff talks down to the wire (Tax Break)

Nick Kasprak, 2012 Likely to be First Year Without AMT Patch

Peter Reilly, Dysfunctional Congress – At Least They Are Not Maiming One Another.  If they don’t, maybe we should.

 

The roundup:

Cara Griffith, What Will Become of Physical Presence? (Tax.com)

Paul Neiffer,  Be Careful Of Fiscal Year Section 179 Issues!

Jason Dinesen,  6 Tax Predictions for 2012 — How Did I Do?

Tres Bien. French Court:  75% Tax Rate on Millionaires Is Unconstitutional (TaxProf)

Robert Goulder, Gérard Depardieu: Tax Exile (Tax.com)

TaxGrrrl, Congress Hasn’t Fixed The Budget Yet, Getting A Raise Anyway.  Courtesy of the President, who maybe thinks they make him look good by comparison.

Chris Sanchirico, New Ways to Think About a Tax on Public Companies

Insureblog,  Cavalcade of Risk #173: Post-Mayan Apocalypse Edition

The Critical Question: Is This Tax Preparation Nightmare Reawakening? (Jim Maule)
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Tax Roundup, 12/20/2012: Blizzard! And meeting interesting people via social media.

Thursday, December 20th, 2012 by Joe Kristan

20121220-3Yes, the blizzard came.  It’s still snowing at 6 a.m., with up to 14 inches.  Here’s what happens next:

* WINDS/VISIBILITY…NORTHWEST WINDS WILL BECOME VERY STRONG AND CONTINUE THROUGH THIS AFTERNOON. SUSTAINED WINDS OF 30 TO 40 MPH WITH GUSTS OVER 50 MPH ARE LIKELY. BLIZZARD CONDITIONS WILL BE WIDESPREAD BY 6 AM WITH BLOWING AND DRIFTING SNOW LEADING TO WHITEOUT CONDITIONS AT TIMES THROUGH THE DAY.

* IMPACTS…LIFE-THREATENING BLIZZARD CONDITIONS ARE EXPECTED INTO THURSDAY MORNING. TRAVEL WILL BECOME DIFFICULT…IF NOT IMPOSSIBLE DUE TO BLOWING AND DRIFTING SNOW. THE IOWA DEPARTMENT OF TRANSPORTATION ADVISES NO TRAVEL! POWER OUTAGES MAY BECOME MORE PREVALENT BY MORNING AS HEAVY SNOW IS WEIGHING DOWN TREES AND STRONG WINDS BY MORNING AND AFTERNOON MAY FELL TREES ON POWER LINES…RESULTING IN POWER OUTAGES.

So, telecommuting.

Still dancing on the edge of the cliff.  The President has threatened to veto House Speaker “Plan B” tax bill (see yesterday’s Tax Roundup).  The House is planning to vote on the bill today.  The Wall Street Journal reports ($link):

The talks remained frozen Wednesday as both sides awaited the outcome of Thursday’s vote. Messrs. Obama and Boehner (R., Ohio) have not negotiated since Monday and continued to take shots at each other in public.

“There are a lot of gyrations, tensions and difficulties, and this could still go awry,” said Rep. Tom Cole (R., Okla.). “But we are closer on Wednesday than we were on Friday. All the other major budget deals were all last-minute deals.”

Peter Suderman has tweeted:

20121220-1

Maybe so.  Forgive me if I’m not reassured.  Not when the acting IRS Commissioner has this to say (my emphasis):

As I stated in my letter dated November 13, 2012, the IRS has maintained the programming of its systems assuming that the AMT will be patched as it has been in previous years. I also indicated that if an AMT patch is not enacted by the end of this year, the IRS would need to make significant programming changes to conform our systems to reflect the expiration of the patch. In that event, given the magnitude and complexity of the changes needed, I want to reiterate that most taxpayers may not be able to file their 2012 tax returns until late in March of 2013, or even later.

As we consider the impact of the current policy uncertainty on the upcoming tax filing season, it is becoming apparent that an even larger number of taxpayers — 80 to 100 million of the 150 million total returns expected to be filed — may be unable to file.

That would make tax season even more fun!

Fiscal Cliff Notes:

Nick Kasprak, How do Personal Income Tax Increases Affect Small Business?  (Tax Policy Blog).  The post shows how much income that will be taxed under the President’s proposals and “Plan B” will be business income.  In Iowa, 25.1% of the adjusted gross income on returns with AGI over $200,000 is business income; the percentage is 37.24% on returns with AGI over $1 million.  In other words, increases in taxes on “the rich” punish Iowa employers.

Elaine Maag, Toppling Over the Fiscal Cliff Could Cost low-Income Families $1,000 in Reduced Tax Credits (TaxVox)

Patrick Temple-West, Boehner’s backup tax plan shakes up ‘fiscal cliff’ negotiations, and more (Tax Break)

Year-end techniques from the edge of the Fiscal Cliff.  My new post at IowaBiz.com, The Des Moines Business Record’s blog for entrepreneurs.

 

Cara Smith, Just Do It. A bad idea when a big company comes to the state looking for a special tax break.

Russ Fox, “Tax Guys” Get Taxing Result.   It seems that two Michigan preparers specialized in inventing earned income for clients to commit earned income tax credit fraud.

Paul Neiffer,  Annual Exclusion Update  Paul explains the annual gift tax exclusion.

TaxProf, Ninth Circuit: NOL ‘Carryover’ Does Not Include NOL ‘Carryback’

Jack Townsend,  More Swiss Bank Enablers Indicted

Peter Reilly,  No Bankruptcy Escape From Bad Tax Shelter And Compound Interest

William Perez,  Tax Software for Planning Out Your Year-End Tax Moves.

Kay Bell, Donder says harvest investment losses; Reindeer Year-end Tax Games Tip #7

 

Oversharing.  Social media experts caution us to be discreet in what we share on our Facebook pages.  A Florida woman failed to follow that advice, reports Tampa Bay Times:

TAMPA — Rashia Wilson all but dared investigators to catch her, court records show.

“I’m Rashia, the queen of IRS tax fraud,” Wilson said May 22 on her Facebook page, according to investigators. “I’m a millionaire for the record. So if you think that indicting me will be easy, it won’t. I promise you. I won’t do no time, dumb b——.”

It’s also bad form to make promises you may not be able to keep:

Grand jurors apparently got the message and responded with a 57-count indictment charging Wilson, 27, of Wimauma and her boyfriend, Maurice Larry, 26, of Tampa with mail fraud, filing false tax returns, conspiracy, aggravated identity theft and theft of government property.

She is charged with stealing over $1 million.  If the case is like many others coming out of the Tampa area, it involves identity theft.  It shows that the IRS is just sharp enough to go after you if you go out of your way to tell the world that you are tax fraud royalty.

 

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