Posts Tagged ‘Patrick Temple-West’

Tax Roundup, 1/23/2014: Ideas edition. And: why are we taxing pot?

Thursday, January 23rd, 2014 by Joe Kristan

20130117-1Bad idea.  Refundable tax credits are the favorite kind of credit for tax fraudsters because they generate tax refunds even when there is no tax paid or withheld.  The earned income tax credit is refundable, and that feature has something to do with 20-25% of the credits issued annually being improper.

An intrepid group of Iowa legislators isn’t letting that stop them.  They have introduced HF 2027 to create a new refundable tax credit in Iowa — a piggyback credit equal to 25% of the als0-refundable (and fraud-ridden) American Opportunity Tax Credit.

The AOTC is based on a percentage of tuition paid for the first four years of college.  It phases out at higher income levels.

Politicians can’t resist using the tax law to pass out political favors.  But even the best-intended ones make the tax law more complicated and, by creating a class with something to lose, they make it that much harder to reform.  When there already countless tuition aid programs, not to mention state-funded colleges and universities, it’s unwise to just throw in one more program willy-nilly.

 

Good idea.  Republican Party to vote for repeal of U.S. anti-tax dodging law (Patrick Temple-West).  

Approved in 2010 after a tax-avoidance scandal involving a Swiss bank, FATCA requires most foreign banks and investment funds to report to the U.S. Internal Revenue Service information about U.S. customers’ accounts worth $50,000 or more.

Criticized by banks, libertarians and some Americans living abroad as a costly and unneeded government overreach, FATCA is on the books, but its effective date has been delayed repeatedly, with enforcement now set to start on July 1.

I hate the headline on the article.  I would have written it “Republican Party to vote to decriminalize personal finance for Americans abroad.”  FATCA makes outrageous demands of non-U.S. institutions that have made Americans unwelcome at many foreign banks.

Related: Republicans Target FATCA As Another Windmill to Attack  (Jack Townsend)

 

haroldWorse idea: film tax credits.

Accounting Web, Film Credits: Your Tax Dollars at Work Making Movies:

Actor/director Ben Affleck told the Los Angeles Times he’s filming part of Live by Night in Georgia, a state that is popular for its film credit availability.

“It comes down to the fact that you have X amount of money to make your movie in a business where the margins are really thin,” he said.

Understood – but there’s a disconnect here. Affleck and his fellow actor/director, Matt Damon, both advocate and participate in using film credits to reduce taxes so they can make their movies. But both are also on record saying, because they are wealthy, their taxes should be raised.

What’s wrong with this “picture?”

Why is the film business, of all businesses with thin margins, entitled to special breaks?  Because politicians are suckers for celebrities.

Joseph Henchman, The Economist Reviews State Film Tax Credit Programs (Tax Policy Blog):

The report notes that it’s getting tougher to compete with Louisiana’s 30 percent refundable credit or New York’s $420 million annual budget to subsidize film and TV, and that independent analyses find these do little on net for job creation or economic growth.

But you can’t forget the intangibles!  As a Des Moines columnist breathlessly reported at the high point of the Iowa film credit looting spree:

But some benefits can’t just be measured on a dollar-for-dollar basis. The movies provide employment to local actors, construction crews, artists, caterers, drivers and a host of others. They expose non-Iowans to what the state has to offer. More intangible is the benefit of interactions in a state that can be cut off from the trends and centers of power. Not to mention the excitement factor. We’ve relied on caucuses every four years to bring action and celebrities to town. Now, sightings are anytime, any place.

Fortunately, Iowa is sadder but wiser now.

 

20130916-1Russ Fox, More Work for Tax Professionals: Submission IDs for Efiled Returns:

In the past, the taxpayer signs the 8879, the tax professional signs it and files it away. Now, the taxpayer signs it, the tax professional signs it, and the return is filed. Once the IRS accepts the return, the software company will assign the Submission Identification Number (SID) to the return. The tax professional must either print another copy of the Form 8879 (this one would have the SID on it) and attach it to the Form 8879, print a copy of Form 9325 (Acknowledgement and General Information for Taxpayers Who File Returns Electronically), or the tax professional must write the SID on the original 8879.

It doesn’t seem like much, but that extra minute for every tax return probably equates to an additional 500 minutes of time if you efile 500 returns in a tax season.

And anybody who’s been around a tax prep office during tax season knows there aren’t all that many extra minutes lying around.

 

TaxGrrrl, 11 Questions To Ask When Hiring A Tax Preparer .  A good list.

Leslie Book, The Ban on Claiming the EITC: A Problematic Penalty (Procedurally Taxing).  ”We have not addressed the special EITC ban that arises when a taxpayer inappropriately claims the EITC.   The following gives some context, with a focus on the two-year ban for reckless or intentional (but not fraudulent) errors.”

William Perez, Which Tax Form to File?

 

Peter Reilly, Is Tax Court Rebelling Against Supreme Court?  Short answer: no.

Tyler Cowen, Income inequality is not as extreme as many citizens think.

TaxProf, The IRS Scandal, Day 259

Cara Griffith, When State Taxes and Interstate Compacts Collide (Tax Analysts Blog).  ”But states can’t have their cake and eat it too; a compact cannot be both binding and offer states significant choices on whether to follow its terms.”

Tax Justice Blog calls the IRS budget cut The Dumbest Spending Cut in the New Budget Deal.  It’s bad policy, but it’s asking a lot of Congressional Republicans to fund an organ of their opposition.

 

20130607-2Because they can.  Why Exactly Are We Taxing Pot? (David Brunori, Tax Analysts Blog):

But I must ask: What is the rationale for imposing special taxes on marijuana? Excise taxes are appropriate to pay for externalities – the costs to society of using the product that are not borne by the market. But it is unclear what, if any, externalities are created by smoking pot.

Economic development in the Doritos aisle?

 

Kay Bell, IRS audit results in $862,000 lawsuit award for taxpayer.  Because he tripped over a phone cord.

 

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Tax Roundup, 6/14/2013: Resort wear edition. And: Iowa income tax reform, finally?

Friday, June 14th, 2013 by Joe Kristan

Today is probably the last post until June 24 as I take a summer hiatus.  It is also the last day of our Traverse City, Michigan seminar.  It’s been a great time, and Traverse City is a beautiful resort town.

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Co-panelist Paul Neiffer covers Day 1 at Traverse City

 

Will 2014 be the Iowa’s Income Tax Reform Year?  Now that he has signed the property tax reform bill, Governor Branstad signals a shift to income tax reform.  Radio Iowa reports:

“I think it’s very likely we’ll be looking at reducing the income tax further,” Branstad says. “When I became governor, the income tax rate in Iowa was 13 percent. We now have it down to 8.98 percent, plus we have full federal deductability…Remember, the top federal tax is 38.5 percent, so the effective rate in Iowa is only about 5.5 percent. We’d like to see that go lower.”

The top federal rate is actually 39.6%, not including deduction phase-outs, or 43.4% considering the Obamacare Net Investment Income Tax.  That leads to an effective top Iowa rate of somewhere between 5.2% and 5.6%.

The way to income tax reform would be to repeal Iowa’s corporate income tax, its rat’s nest of corporate welfare deductions, and its mess of well-intended but ineffective social welfare tax incentives.  You could get a 0% corporate rate and a 4% individual rate, and an Iowa 1040 that fits on a postcard.  You could get the Quick and Dirty Iowa Tax Reform Plan, in other words.

That would require the Governor to swear off the corporate welfare giveaways so beloved by the Iowa “economic development” bureaucracy, and the associated fertilizer plant ribbon cuttings.  Yet I think 4% individual rate and 0% corporate rate would do a lot more for Iowa’s economy than the dozens of “targeted” economic development tax credits and deductions  — though not so much for Iowa’s middlemen, fixers and economic development officials.

Lyman Stone,  Iowa Approves Property Tax Reductions, New Tax Credits (Tax Policy Blog):

 However, the large reduction in property taxes coupled with a smaller reduction in income taxes will shift the burden of taxation more heavily onto income: a less stable and more distortionary tax. Furthermore, SF 295 creates or expands several new credits, funds, and preferential treatments in the tax code, exacerbating the problem of non-neutrality, and its distortionary effects.

In sum, the law is a mixed bag. The Governor has indicated another look will be taken at the income tax later this year: hopefully the problem of excessive and distortionary credits can be resolved then. And, if not, then Iowa may have to sit tight at 42nd on our State Business Tax Climate Index, maintaining the 4th highest top income tax in the nation, and the highest corporate tax rate.

Indeed.

 

Bleeding Heartland, Five perspectives on Iowa’s new property tax law

 

Michael Giberson looks at Iowa’s (misguided) disaster “price gouging” policies:

Portable toilet price gouging gets mentioned in several Attorney General news releases. It may be the case that the Iowa law is the only one that specifically lists “sanitation supplies” among the good covered.

The same newspaper story mentioned, “soybean price futures have jumped 25 percent and corn futures 10 percent over the past month as crop losses have spread across Illinois, Iowa and Missouri. That means farmers outside the flood zone will get far more for their crops than normal….” The state didn’t have a price gouging law until later that year. But if the price increase happened this year, would farmers in the affected counties be in violation of state law?

Higher prices are nature’s way of directing resources to their most important uses, and restricting their use when supplies are tight.  Price gouging laws mess with Mother Nature.

 

Peter Reilly,  Need Strong Documentation Of Time Spent To Claim Real Estate Losses.  Peter covers the same issues we covered here, and he points out that the same issues of documenting time you spend in an activity become even more important under the Obamacare Net Investment Income Tax.

TaxProf, The IRS Scandal, Day 36

The IRS is closed today.  The scoop from Kay Bell, who also reminds you Where to mail your estimated tax 1040-ES form due Monday.

Jack Townsend, Quiet Disclosures That Don’t Stay Quiet – Civil E xaminations

Jason Dinesen,  Glossary: DOMA

Howard Gleckman, As Marriage Changes, Should Joint Filing Go The Way of Ozzie And Harriet?

Patrick Temple-West,  REIT status questioned by IRS, and more

TaxGrrrl, Did Spanish Taxing Authorities Target Messi To Send A Message To The World?   A message like “who is Messi?”

David Brunori, The Myth of State Balanced Budgets

Tony Nitti,  Former PwC Partner Falls Victim To ‘Hot Asset’ Rules In Tax Court

Robert D. Flach has your Friday Buzz!

 

Going Concern, Georgia Man Discovers IRS Wasn’t Joking About the Possibility of His Fake Treasury Bond, Fraudulent Tax Return, Bogus Refund Landing Him in Jail

See you after vacation!

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

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

Flickr image by Christian under Creative Commons license.

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

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

 

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

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

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

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

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

TaxProf, The IRS Scandal, Day 29.

 

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

 

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

 

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

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

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

 

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

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

 

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

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

 

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

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

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

 

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Tax Roundup, 6/6/2013: Omaha Beach edition. And if you like new taxes, you can have Christmas all year!

Thursday, June 6th, 2013 by Joe Kristan

Just in case you’re having a bad day…  They hit Omaha Beach 69 years ago today.

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I don’t know about you, but I’m pretty sure nothing I face today will be hard compared to that.

 

TaxProf, The IRS Scandal, Day 28.

Washington Post,  Two IRS officials put on administrative leave for accepting gifts at Calif. conference.  One is the “director of implementation and oversight”  for Obamacare implementation, so maybe he can say it was just an oversight.  But Going Concern notes ”It was $1,100 in free food. Just freaking sayin.”

Robert W. Wood,  Lavish Expenses Are A No-No, Unless You’re The IRS

Kay Bell asks “Can the IRS be saved?”   It would be a lot easier if it functioned only as a revenue collection agency.  Now it is a superagency in charge of health care, industrial policy, historic preservation, welfare… as if just figuring taxable income weren’t enough of a challenge.

 

So what about the things IRS is supposed to be doing?  Jason Dinesen gives us a hint in Taxpayer Identity Theft — Part 15:

I’ve been telling the story of Wendy Boka and the identity theft nightmare she’s going through with the IRS. Her husband Brian died at age 31 in 2010. Someone stole his identity and filed a fraudulent tax return in his name.

The IRS still has not processed Brian and Wendy’s final joint tax return for 2010. Wendy is owed a refund from that tax return and we’re still waiting for that refund to be paid.

Good thing they have that line-dancing thing down.

 

Janet Novack,  Don’t Let Fear Of Taxes Or IRS Audits Destroy Your Wealth.  TaxGrrrl is quoted:

“Don’t let the tax tail wag the dog.” In other words, you should think about taxes when you invest, but “don’t be so paralyzed by the tax consequences that you miss out.” That goes for selling, too–don’t keep holding an asset you should get rid of just because you hate paying capital gains tax.

Wise.

 

Ben Harris,  What Changes in the Mortgage Deduction Would Mean for Home Prices (TaxVox):

By contrast, completely eliminating the mortgage interest and property tax deduction—a drastic change that probably would only happen if accompanied by a new tax preference for housing—would cause housing prices to fall by an average of 11.8 percent in the 23 cities studied.  Estimated price declines would range from 10.3 percent in Seattle to 13.8 percent in Milwaukee.

That seems high to me.

 

Cara Griffith, States’ Misuse of Unclaimed Property Laws (Tax Analysts Blog): “Unclaimed property laws were never meant to be a major revenue raiser for states or a major headache for businesses.”  Unfortunately, politicians think that everything defaults to them.

Brian Strahle,  State and Local Tax Challenges with Leases of Equipment and Other Assets – GUIDE / WEBINAR

 

Peter Reilly, Conservation Easement No Deduction For Hypothetical Vineyard

In other news, bears poop in the woods.  Social Security Still Deep in the Red (Kyle Pomerleau, Tax Policy Blog).

social security fund deficit

William McBride,  Contra Every Major Study, EPI Claims Corporate Tax Does Not Affect Growth (Tax Policy Blog)

Tax Justice Blog,  CTJ Report: Apple Is Not Alone.  Amazing that other companies also want to use legal means to reduce their taxes.

Patrick Temple-West, Calculating Apple’s true U.S. tax rate, and more

TaxGrrrl, As Senate Debates Immigration Reform, Worries Grow Over Tax Amnesty Provisions

 

Christmas in June?  They’re trying to restore the Christmas Tree Tax (Roger McEowen).

 

 

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

Wednesday, June 5th, 2013 by Joe Kristan

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

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

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

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

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

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

 

TaxProf, The IRS Scandal, Day 27

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

 

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

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

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

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

 

Paul Neiffer, Update on Commodity Gifts

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

 

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

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

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

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

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

 

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

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

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

 

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

 

 

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

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

Lois Lerner, IRS, Class of 2013?

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

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

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

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

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

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

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

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

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

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

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

Salvi queried how then could such an agreement be enforced.

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

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

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

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

 

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

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

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

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

 

TaxProf, The IRS Scandal, Day 26.

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

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

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

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

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

 

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

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

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

 

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

 

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Tax Roundup, 5/31/2013: Obama and Shulman, buddies. And the hidden path to world domination.

Friday, May 31st, 2013 by Joe Kristan

Megan McArdle, Boy, the Head of the IRS Went to the White House A Lot

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I believe Megan is correct when she says that it is unlikely that Shulman was spending his time there conspiring against the President’s opponents:

Why on earth would it have taken 118 meetings?  Did Doug Shulman not  understand “target the tea party” the first 117 times Obama said it?  

The close contact between the IRS and the White House is actually what you might expect to see now that the IRS has become a ridiculous superagency with a portfolio dwarfing that of the traditional cabinet agencies.  Still, it’s very weird that Doug Shulman spent more time at the White House than the Treasury Secretaries and the Secretaries of Defense — combined.

Update: It would be less weird if it didn’t happen.

 

TaxProf, The IRS Scandal, Day 22

IRS, Bureaucratic Blunder or Political Profiling? (Topaccountingdegrees.org)

 

Kay Bell, More tax professionals (including bloggers) formally support legal challenge of IRS’ effort to regulate tax preparers.  That would be me.

Kyle Pomerleau, A Redistributional Effect of Obamacare (Tax Policy Blog)  Picking the pockets of healthy young men.

Estimated effect of Obamacare on health insurance costs in select states (via Tax Policy Blog)

Estimated effect of Obamacare on health insurance costs in select states (via Tax Policy Blog)

 

William Perez,  “Complaint Case #460575036224″ — Fake Email from the IRS.  Rule of thumb: if you get an e-mail that says it’s from the IRS, it’s not from the IRS.

Trish McIntire, Phishing Again

 

Paul Neiffer, Pay Your Kids!  If you can get them to actually do some work, of course.

Brian Mahany,  The Promised Land – FATCA Causes Record Number Of Americans To Leave.  Congress is making America more of a “selective” taste.

 

TaxGrrrl, Donations Pour In For Oklahoma Relief Efforts, Including $1 Million From Carrie Underwood and Kevin Durant

Patrick Temple-West,  Evidence that tax breaks favor the rich, and more.  Common sense, folks: the rich pay most of the taxes, so any “break” will go to the person who pays most of the taxes.

Howard Gleckman,  Who Benefits from Tax Preferences? You Do. (TaxVox): “When it comes to tax preferences, Pogo was right. “We have me the enemy and he is us.”

 

Fiduciary Income Tax Blog: Decanting.  Trusts, not old wine.

Jim Maule, The Tax Woes of a Corporation Owned by an Indian Tribe

Tax Justice Blog, Governor Cuomo Hearts Tax Cuts.  But only in some places.

Brian Strahle,  MIDDLE MARKET COMPANIES:  RECENT STATE AND LOCAL TAX “PAIN” POINTS

 

Christopher Bergin, Ireland Is Not a Tax Haven, Dammit (Tax Analysts Blog)

Robert D. Flach has his Friday Buzz on! I like this: “The recent scandal has proven that the IRS can’t even properly regulate its own employees, let alone try to properly regulate tax preparers!”

 

It’s a small world after all.  McGladrey’s Plan For World Domination: Nebraska! (Going Concern)

 

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Tax Roundup, 5/29/2013: Why Did Shulman spend so much time at the White House? He has no idea.

Wednesday, May 29th, 2013 by Joe Kristan
The tax law - The Ultimate Swiss Army Knife of public policy.  Flickr Image courtesy redjar under Creative Commons license.

The tax law – The Ultimate Swiss Army Knife of public policy. Flickr Image courtesy redjar under Creative Commons license.

If you or I went to the White House, we’d remember it always.  I have been inside the Treasury once, and the IRS building once, and I definitely remember it.  But when you are a real mover and shaker like Doug Shulman, it all starts to blur, apparently.

From WashingtonExaminer.com:

Former Internal Revenue Service Commissioner Doug Shulman visited the White House 118 times between 2010 and 2011. Acting Director Steven Miller, who took over at the IRS in November, also made numerous visits to the White House, though variations in the spelling of his name in White House visitor logs makes it difficult to determine exactly how many times.

The frequent trips to the White House under Obama far outnumbered the times other administrations felt the need to meet with the IRS, according to Mark Everson, who led the IRS under former President George W. Bush. Everson said he remembers making only one trip to the White House between 2003 and 2007 and said he felt like he’d “moved to Siberia” because of the isolation.

Funny, I thought the IRS was an “independent agency.”

Shulman said he couldn’t remember why he went to the White House so frequently, though some of the visits were probably about the IRS’ role in implementing Obama’s health care reforms, he told a congressional committee. Logs show Shulman met with two West Wing officials working on health care.

“The IRS has a major role in the money flow,” Shulman explained to Congress.

But while the health care-related visits were explained in the logs, many others included no explanation.

I doubt Shulman met with the President or his aides to plot audits of presidential enemies — though you’d think he’d be able to figure out why he spent so much time there.  Do they still have a bowling alley?

It’s likely that his visits reflect the way the IRS has become a cross-functional super-agency, with bigger responsibilties than most cabinet departments.  That is at least as disturbing as the outrageous Tea Party harassment.

 

Don Boudreaux, Count on It: Power Will Be Abused:

The fundamental question raised by the IRS scandal isn’t whether Obama ordered, or even knew of, the apparent misuse of the taxing power to punish political opponents. Rather, the fundamental question asks about the wisdom of creating in the first place government agencies that can so easily abuse their power in order to play political favorites.

The question answers itself.

 

Linda Beale thinks it’s just fine to harass the Tea Party:

This so-called “scandal” is just another instance of right-wing obstructionism that is willing to sacrifice good government for maintaining or increasing political power.

Um, no.  Even President Obama says that what the IRS did was a bad thing.  It’s a little late to try to pretend that it was just the IRS doing its job.  Unless, of course, you think its job is to obstruct political opposition and coddle organizations congenial to Linda Beale.

 

Patrick Temple-West, Groups test political tax rules, and more (Tax Break)

Martin Sullivan, TIGTA Report Implies a Lot, Proves Little, About Bias at the IRS (Tax Analysts Blog)

TaxProf,  The IRS Scandal, Day 20

 

Jack Townsend covers a developing U.S. – Swiss tax enforcement agreement in Swiss Settlement May Be Near and More Developments on Swiss Agreement with U.S.: “With this development, I am sure that the IRS will be sending a lot of John Doe treaty requests.”

 

Paul Neiffer, More States to Raise Taxes?

Scott Drenkard, Wisconsin Plan Cuts Rates, Broadens Bases, Improves State Business Tax Climate Ranking (Tax Policy Blog).  Iowa should try that sometime.  The Quick and Dirty Iowa Tax Reform Plan is ready to go!

 

Peter Reilly, Tax Reform – Should Partnerships And S Corporations Follow The Same Rules ?

Howard Gleckman, The Challenge of Cutting Deductions to Lower Tax Rates (TaxVox)

TaxGrrrl, Internet Sensation Charles Ramsey Gets Free Food From McDonald’s: Do You Want Taxes To Go With That?  If he takes them up on it, the medical deductions may offset any taxable income.

 

Joseph Thorndike, Krugman Berates a Bush — Unfairly (Tax Analysts Blog)

Jim Maule, Reader Weighs In on Weighing the Code

 

Of course he does.  Nicolas Cage Urges Nevada to Subsidize the Film Industry (Joseph Henchman, Tax Policy Blog)

Let us praise our dedicated civil servants.  IRS employee charged with going on a years-long buying spree with Uncle Sam’s credit card (Kay Bell)

A disgrace to his profession. Las Vegas pimp faces prison after pleading guilty to tax-evasion charge

It’s good to be king.  Princess, maybe not so much. Princess Cristina to be investigated for tax fraud

 

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Tax Roundup, 5/28/2013: Delayed Monday edition. And spam!

Tuesday, May 28th, 2013 by Joe Kristan

20130419-1Arnold Kling,  The IRS Scandal:

To me, the real story is the low status of the Tea Party.  As others have pointed out, if the NAACP or the Sierra Club had complained about harassment, politicians and the press would have investigated the story from day one.  But I think that it is wrong to think of this as an ideological double standard.  If Code Pink or Greenpeace had complained about IRS harassment, nobody would have risen to their defense. My point is that, in the eyes of the establishment, the Tea Party is closer to Code Pink or Greenpeace than to a respectable organization.

While I think Arnold is generally right, I think that Code Pink and Greenpeace would get a lot more establishment love than the Tea Party folks.  Constitutionalism and fiscal sanity just aren’t clubbable.

 

Doug Bandow, Restrain the Abusive Administative State (American Spectator, via Cafe Hayek):  “Reforming the IRS won’t make sense otherwise.”

Jack Townsend, Invoking the Fifth – the House Oversight Inquisition

TaxProf,  The IRS Scandal, Day 18

 

 Quotable:

Corporations make location decisions based on three main factors: labor costs, access to markets, and a qualified workforce. Without those factors, no amount of tax incentives will ever persuade a business to invest in a particular place. Scholarly research and a ton of anecdotal evidence show that businesses don’t make location decisions based on tax incentives. – David Brunori, Tax Analysts ($link)

Iowa just increased its tax incentive budget by $50 million.

 

Tony Nitti, Eleventh Circuit: Father Of The Year Candidate Recognized $36 Million In Taxable Income Upon Exercise of Options:

When the dust settled, Dad was left with a $14,000,000 bill, while his kids were entitled to a nice fat tax deduction. This act of poetic justice should remind all parents that if you’re going to be overbearing and meddle in your kids’ lives, try and confine your fatherly misgivings to hurling empty whiskey bottles at Little League umpires, like my old man.

 

Patrick Temple-West, Tax moves pit large companies against small, and more (Tax Break)

Peter Reilly, Current Tax Reform Push Less Promising Than 1986

 

Rich States, Poor States, an annual analysis of “state competitiveness” by the American Legislative Exchange Council (‘ALEC,”or, to Ed Fallon, “Satan”) is out for 2013.  The free-market group ranks Iowa at 25th overall for both “economic performance” and “economic outlook.”  Iowa rates well for its right-to-work rules, state debt, and court system, but poorly for its tax system.

Tax Justice Blog, Congratulations to Minnesota for Crossing the Finish Line.  No, in spite of their politicians best efforts, Minnesota isn’t finished off yet, but they’re working on it.  Minnesota rates 46th on the ALEC “economic outlook” list.

 

William Perez,  Tax Relief For Oklahoma Tornado Victims

Trish McIntire, New Form I-9

 

Kay Bell,  Memorial Day 2013: Remembering those who gave all, offering some tax help for those still giving

Jim Maule, Paying Taxes: In Memoriam.

 

Robert D. Flach starts off your short work week with a fresh Buzz!

Better Spam.  The spambots made 190 deposits into my spam inbox over the weekend.  Usually they have stupid names lie “Swaceague,” “Moncler Jackets” or “Cheap Moncler Jackets,” so I was pleasantly surprised to see “tom waits glitter and doom live” make an entrance.  Unfortunately the comment was typically spammy:

My spouse and I stumbled over here from a different web address and thought I might as well check things out. I like what I see so i am just following you. Look forward to looking at your web page again.

Dang.  It would be nice if Tom Waits really was spamming me.  But I am oddly intrigued that family web-surfing is a theme in spam.  “My cousin recommended this web page to me,” etc.  “My wife and I were surfing, and awesome commentary here.”  Are there really cultures where anybody would say something like that?  Is there somewhere on the planet a society where they delight in recommending favorite web sites to shirttail relatives eager to follow up on web recommendations from in-laws?

 

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Tax Roundup, 5/22/2013: Don’t blame me, I’m only the boss. Also: tornado tax relief.

Wednesday, May 22nd, 2013 by Joe Kristan
Former IRS Commissioner Shulman, showing how bad he feels about politcal harassment under his watch.

Former IRS Commissioner Shulman, showing how bad he feels about politcal harassment under his watch.

The Worst Commissioner Ever returned to Washington yesterday to testify before a Senate committee on the IRS scandal.  He bravely took responsibility for the targeting of disfavored political groups and apologized to the victims.

Well, not exactly:

 I certainly am not personally responsible for creating a list that had inappropriate criteria on it. And what I know, with the full facts that are out, is from the inspector general’s report, which doesn’t say that I’m responsible for that. With that said, this happened on my watch. And I very much regret that it happened on my watch.

In other words, I was just the boss, and you can’t blame me for what those crazy kids in Cincinnati do.

 

Just exercising the right they encouraged the Tea Partiers to use – silence.  The IRS functionary who announced the scandal in response to a planted question isn’t going to answer real ones.  From the Wall Street Journal:

Lois Lerner, the head of the Internal Revenue Service office that targeted conservative groups, intends to invoke her constitutional right against self-incrimination and decline to answer questions about the matter when questioned by a congressional committee Wednesday.

Ms. Lerner, director of the tax-exempt-organizations division at the IRS, notified the House Committee on Oversight and Government Reform through her attorney that she wouldn’t answer questions on the matter, according to a committee spokesman.

When it comes to the Bill of Rights, better late than never.

 

Is Washington a suburb of Cincinnati?  Oversight from Washington, All Along    (Eliana Johnson)

TaxProf, The IRS Scandal, Day 13

Watchdog.org, Top 10 quotes about Obama’s #scandalpalooza

Via Don Boudreaux, The Real Lesson of the IRS Scandal (Richard Epstein) and The Autocrat Accountants    (Mark Steyn)

Patrick Temple-West,  White House knew of IRS scandal in April, and more (Tax Break)

Clint Stretch, Targeting tax-exempts and tax reform (Tax Analysts Blog)

Joseph Thorndike, A World Without 501(c)(4)s (Tax Analysts Blog)

Russ Fox, Ms. Lerner Knows the Fifth (IRS Scandal Update)

 

In other news:

Kay Bell, Tornado-ravaged areas of Oklahoma declared major disasters, leading to special tax relief from IRS

Trish McIntire,  Oklahoma DIsaster- Tax Relief.

TaxGrrrl, IRS Announces Tax Relief For Oklahoma Tornado Victims

 

Paul Neiffer, Will Excess Farm Loss Rules Apply With New Farm Bill?

Jason Dinesen, How to Allocate the Deduction for Federal Estimated Tax Payments on Your Iowa Tax Return

Robert D. Flach, TRUE TAX TIME TALES – IRA WITHDRAWALS

 

Brian Strahle,  MARYLAND:  WYNNE CASE UPDATE

On Friday, May 17, 2013, the Maryland Court of Appeals denied the comptroller’s motion for reconsideration in Comptroller v. Wynne,  which struck down the state’s application of credits against pass through income from S corporations; however, the court stayed implementation of the ruling to allow the comptroller to petition the U.S. Supreme Court for certiorari.

Peter Reilly,  RVania Resident Taxed By New Mexico.  State tax problems of folks who live on the road.

 

Kaye Thomas,  Self-Directed IRA Implodes.  The same case I discussed here.

 

 Jack Townsend, Tax Perjury and FBAR Charges Related to Illegal Income Fake Art Case

Jim Maule, Taxation is Not Theft.  It’s not theft when the government does it.

 

 

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Tax Roundup, 5/15/2013: Those exempt organization returns are due today.

Wednesday, May 15th, 2013 by Joe Kristan

20130515With all the excitement over tax-exempt entities, it’s worth remembering that their returns — the 990 series — are due today for calendar-year filers.  And if an organization fails to file 990s for three years, its exempt status lapses.  Extensions are available, but they have to be filed today.

Late filing can be expensive.  For small organizations, the penalty is $20 per day of late filing; for those with receipts over $1 million, its $100 per day.  That adds up fast.

More information is available at the IRS page Form 990 Resources and Tools for Exempt Organizations.

Related: Trish McIntire, Important Tax Exempt Information

 

So let’s get started with this morning’s IRS Scandal news.  The TIGTA report whose imminent release triggered the IRS announcement of the scandal last Friday came out yesterday.  I covered it in a post last night.  Other coverage:

Tax Prof links:

Aprill: The TIGTA Report on the IRS Scandal: Questions About the IRS and About the Report

Hackney: The TIGTA Report on the IRS Scandal: Be on the Lookout for False Partisan Witchunts.  Yes, insist on only true partisan witchhunts.

And his roundup, The IRS Scandal, Day 6

Other coverage:

Russ Fox,  The Cynics Were Right (The IRS Scandal Gets Official Confirmation)

Patrick Temple-West,  Uneven IRS scrutiny, and more

 

Other Tax things:

David Brunori, Balderdash Masquerading as Tax Policy Arguments (Tax Analysts Blog)

It is no secret. This may hurt my libertarian credentials, but I believe the U.S. Congress should pass the Marketplace Fairness Act.  The tax system is sound when built on a broad base and low rates. Broad  base means you tax everything without regard to who is lobbying the legislature. It follows – and it really does follow – that the sales tax  should be imposed on all personal consumption. 

I can see a need for something like this, but I think it should be done by having a single point of compliance for sellers under a uniform set of rules, rather than subjecting internet sellers to the thousands of local tax systems.  David minimizes the compliance burden.  As somebody who makes a living off of the compliance burden, I can say with confidence that he is mistaken.

Joseph Henchman, Indiana Approves Income Tax Reduction (Tax Policy Blog)

 

Peter Reilly, Doctor Joyce Brothers Cameo In Tax Court And Women’s History

Jason Dinesen, Same-Sex Marriage, Community Property, And Multi-State Income — Part 2

Fiduciary Income Tax Blog, WSJ on Reducing a Trust’s Income Taxes

Jim Maule,  Tax Ignorance Gone Viral.  It really bugs him when people say the Internal Revenue Code is 24 feet high.

 

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Tax Roundup, 5/14/2013: Worst Acting Commissioner Ever? And a career tip.

Tuesday, May 14th, 2013 by Joe Kristan

 

Acting Commissioner Steven T. Miller

Acting Commissioner Steven T. Miller

Steven Miller, acting head of the IRS since Doug Shulman left office, apparently hasn’t been any more honest than The Worst Commissioner Ever about IRS harassment of right-side political groups.  AP reports:

Miller was first informed on May, 3, 2012, that applications for tax-exempt status by tea party groups were inappropriately singled out for extra scrutiny,    the IRS said Monday.

At least twice after the briefing, Miller wrote letters to members of Congress to explain the process of reviewing applications for tax-exempt status without disclosing that tea party groups had been targeted.

We’re supposed to tell the truth when we file our returns.  It’s not asking too much for them to return the favor.

Not just harassment, but leaking confidential information.  IRS Office That Targeted Tea Party Also Disclosed Confidential Docs From Conservative Groups (ProPublica.org)

No, too late.  White House: Too early to talk about firing IRS employees  (Examiner.com)

So it’s the Supreme Court’s Fault?  Pelosi: IRS Scandal “An Opportunity” To Scrutinize 501(c)(4)s And “Overturn Citizens United”  All right, then.

 

TaxProf, The IRS Scandal, Day 5

Russ Fox, Drip, Drip, Drip: The IRS Scandal Continues to Grow

Jeremy Scott, Lerner’s Admission and Apology Ring Hollow (Tax Analysts):

 The incompetence boggles the mind. It’s also bewildering how the Service could sit in front of GOP lawmakers and chastise them for underfunding tax enforcement when employees were using some of those supposedly precious funds to conduct a politically charged vendetta against conservative exempt organizations.

I think the perpetrators were quite competent in doing what they set out to do.  The only incompetence was in getting caught.  But he’s absolutely right that the agency’s poor-mouthing, including next week’s furloughs, will no longer convince anybody.

 

TaxGrrrl,  Congress And The President Want You To Get Mad At IRS Over Tax Exempt Targets (Just Not At Them):

It’s clear that those at the top knew something (it has been reported that Shulman was alerted to the issue in 2012) and that it wasn’t the work of a handful of rogue operatives. It was a plan. And then IRS lied about it. And they should be held accountable.

But it still disturbs me that no one in Washington really seemed to care until the behavior went public.

Many of us didn’t believe the IRS would really do something so outrageous.  I had seen some of the questions that IRS was asking Tea Party outfits, and they seemed out of line, but I figured the IRS was being an equal-opportunity annoyance.  That they did it politically is what is triggering the outrage.

 

Howard Gleckman,  The IRS Was Wrong to Single Out Tea Parties, But Many Political Groups Should Not be Tax-Exempt.  Yes, let’s change the subject.

Going Concern, Here Are Some of Things People Are Saying About the IRS Scandal,  An excellent roundup of the state of play, but with too much emphasis on the “incompetence” slant and not enough on “evil.”

Patrick Temple-West, IRS targeted groups critical of government, and more (Tax Break)

Kay Bell, Rubio demands resignation of nonexistent IRS commissioner; Obama vows to ‘find out exactly what happened’.  He can get some sleuthing tips from O.J.

Linda Beale,  More on the IRS’s “targeting of conservative groups”.  She tries to play down the issue.  It shows how slim are the pickings for those who don’t want to think this is a big deal.

 

In other news:

Tax.com has moved.  For reasons that elude me, Tax Analysts has apparently given up the handy Tax.com domain and moved their excellent group blog to a tab on their home page, Tax.org.  I think that’s a mistake, but it’s worth going out of your way to find it.

Martin Sullivan, Do U.S. Multinationals Have It Tough? (Tax Analysts).

Russ Fox, Leisure Suit Larry Goes to Tax Court

Peter Reilly,  Electing To Capitalize Expenses Can Pay Off On Sale

Kyle Pomerleau,  Another Year, another Obamacare Tax (Tax Policy Blog)

Jack Townsend,  The Dangers of the Unrecorded Interview by Criminal Agents — FBI or IRS

It’s Tuesday, so it’s Buzz Day at Robert D. Flach’s place.

 

Career Advice.  Protip: Threatening to Kill Your Colleagues, Even in the Midst of a Brutal Busy Season, Is Never Cool (Going Concern).  OK, I take it back.  Mistakes were made. There was no threat intended in my overzealous pursuit of tax return excellence.  It was just an administrative shortcut.  OK, incompetent, but not evil.  I vow to find out exactly what happened.  If I threatened anyone, it was outrageous.

 

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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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Look at a celebrity return? You’re fired! Harass a Tea Party outfit? Carry on.

Friday, May 10th, 2013 by Joe Kristan
Former IRS Commissioner Shulman, showing how much he cares about IRS political integrity.

Former IRS Commissioner Shulman, showing how much he cares about IRS political integrity.

Confession:  I never took seriously complaints that the IRS was harassing Tea Party organizations who filed for tax-exempt status.  It didn’t seem impossible, but the IRS can be difficult to anybody, regardless of political affiliation.  Don’t be paranoid!

Silly me.

The legacy of the Worst IRS Commissioner Ever gains new luster with this shocking revelation:

In a practice that conservatives complained about during the 2012 election campaign, organizations that used the words “patriots” or “Tea Party” in their tax-exempt status filings were flagged by the IRS for further review.

Lois Lerner, director of the IRS tax-exempt office, said the practice “was absolutely incorrect and it was inappropriate.”

Speaking at an American Bar Association conference in Washington, Lerner said, “We would like to apologize for that.”

Oh, but don’t worry:

Lerner said the screening process was “absolutely not” influenced by anyone in the Obama administration.

All righty, then.  Not even the senior administration official who said this about the president of another exempt organization:

“President [Michael] Crowe and the Board of Regents will soon learn all about being audited by the IRS.”

In fact, that was the most senior administration official of all.

The tone of any organization is set at the top.  Unwittingly or not, the President’s statement endorsed IRS harassment of his opponents in a Chicago-style wink-nudge kind of way.  As it’s safe to assume that IRS employees overwhelmingly voted for the President, a hint might have been all that was needed.

His subordinate IRS Commissioner Doug Shulman wasn’t worried about it.  In March 2012 The Worst Commissioner Ever testified:

The Internal Revenue Service is not making it harder for tea party groups to attain tax-exempt status because of their political views, the  agency’s chief told Congress on Thursday.

“As you know, we pride ourselves on being a non-political, non-partisan organization,” Shulman said.

Many tea party groups are applying under section 501 (c) (4) of the federal tax code, which grants tax-exempt status as long as organizations are not primarily involved in activity that could influence an election. That determination is up to the IRS.

“There’s absolutely no targeting. This is the kind of back and forth that happens to people” who apply for tax-exempt status, Shulman said.

In Washingtonspeak, that’s “inoperative.”  Yet whatever “mistakes were made,” they don’t bother the IRS enough to fire anybody, as far as anybody knows.   This is an organization that will fire employees for peeking at movie star tax returns.   But political harassment — well, mistakes were made.

Worse still, after the initial revelation, the IRS had the nerve to say this:

Mistakes were made initially, but they were in no way due to any political or partisan rationale.

Right.  Because “patriot” and “Tea Party” have no political connotations.  Exemption applications with those names were beaten to death just by some amazing coincidence.

The next time some poor schmuck is on trial for not reporting income, he should try saying that his underreporting of taxes “was in no way due to any tax avoidance rationale,” just to see how it works.

So I stand corrected.  I’ll remember now paranoia about the IRS is perfectly justified.  This is a big deal, and it should result in firings.  If it’s a firing offence to look at a starlet’s 1040, it should at least be as serious to use the power of the IRS to pick on disfavored political groups.

 

The TaxProf of course has an excellent roundup.  And the right side blog world is all over this:

Ann Althouse

James Taranto:  The New Nixon

Damon Root,  Will The New York Times Apologize for Applauding IRS Harassment of Tea Partiers?

Mike Riggs,  IRS Targeting Tea Party Groups Is “Unconscionable,” Says Rep. Darrell Issa

Scott Shackford  IRS Admits Targeting Tea Party Groups During 2012 Elections (Updated with Actual Letters)

Megan McArdle, IRS Singled Out Conservative Groups for Extra Scrutiny

Kevin Williamson, ‘Mistakes Were Made’

 

On the left, nothing yet from Linda Beale, Jim Maule,  TaxVox, or Citizens for Tax Justice.

 

Related: Some people just can’t tell good IRS jokes

 

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Tax Roundup, 5/10/2013: Pork and Tequila edition.

Friday, May 10th, 2013 by Joe Kristan

Politicians advance plan to allow politicians to give more tax money to private businesses.  From TheGazette.com:

Iowa communities would be able to designate special 25-acre development zones and use a share of sales tax and hotel-motel tax revenues to assist private projects of at least $10 million under legislation that’s getting bipartisan support.

House File 641 would establish reinvestment districts designed to spur development of “big ideas,” said Sen. Matt McCoy, D-Des Moines, who led a Senate Ways and Means subcommittee that revamped the bill representatives approved 87-9 last month.

This is, of course, an awful idea.  Politicians are notoriously bad at allocating investment capital, and they tend to make sure it goes to their cronies and contributors.  But when the state’s Governor, a member of the purported small government party, does an end-zone dance over a giant federal subsidy to a private utility controlled by a billionaire, the battlefield is left to the crony capitalists.  The House version of HF 641 passed 87-9.

 

 

David Cay Johnston, No Bang for the Buck (Tax.com)

New York State’s comptroller says giving $2.8 billion in tax breaks over  five years added more than a million jobs, which would be great news except that the state lost jobs.

I’m confident Iowa’s job-creating tax breaks work just as well.

 

Kyle Pomerleau,  Suggested (Large) Tax Increase on Investors is Far From International Standards (Tax Policy Blog)

For capital gains, the current law is already out-of-step with international standards. After the fiscal cliff, combined state and federal capital gains rates increased from 19.1 percent to 28 percent. This is more than 10 percentage points higher than the international average. One suggestion, of course, is to tax capital gains at the rate at the 1986 rate of 28 percent. This would push America’s average combined federal and state capital gains rate to more than 35 percent, more than double the international average.

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Kay Bell,  Tax-writing committee chairmen launch tax reform website

Howard Gleckman,  Will the Slowdown in Health Cost Growth Change the Budget Debate?  (TaxVox)

Patrick Temple-West,  Tax collections from wealthy are saving government, and more (Tax Break).

Russ Fox,  How Long Should You Keep Your Tax Returns For?

Jim Maule, It’s Not a New Tax

Robert D. Flach offers your Friday Buzz.

 

Jack Townsend,  IRS, UK and Australia Joint Efforts on Offshore Accounts

Linda Beale,  Moving in the right direction: US, UK, Aussies to share tax info

 

Inspirational tax blogging.  No, really:  Five Years After A Brain Aneurysm, Fear Of Dying Can’t Make Me Quit Living  (Tony Nitti).  Inspiring and moving.

 

News you can use.  Book On New Jersey Wines Does Not Support Deducting Trips To France (Peter Reilly)

 

Her sister Everclear wasn’t implicated.  From nbc-2.com, Ft. Meyers:

A chance traffic stop on I-75 in Lee County uncovers a massive tax fraud scheme. Deputies say the woman accused used her job to steal personal information – even stealing from people who were dead.

Thursday, 23-year-old Tequila Gordon was sitting in the Lee County Jail. Her bond was set at $72,000. 

Prosecutors say she worked at liberty tax services in 2009 and stole personal information from dozens of people.

I would think having a first name of “Tequila” would make getting a good job challenging.  It won’t be any easier now.

 

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Tax Roundup, 5/8/2013: Still no tax fairy. And no fiscal heroes.

Wednesday, May 8th, 2013 by Joe Kristan

tax fairySearch for the Tax Fairy leads to federal prison.  The Tax Fairy, in the imagination of believers, appears in the form of magical legal maneuvers that make your taxes all go away.   Your drinking buddies may even claim to have seen it, or that their tax guy knows her.

It can hurt when you find that there is no Tax Fairy.  It must hurt for one South Dakota surgeon.  From RapidCityJournal.com:

Friends and family described Dr. Edward Picardi as a compassionate, highly skilled surgeon, but the accolades failed to spare the doctor a five-year prison sentence for income tax evasion on Tuesday.

Despite the good the Sturgis man was proclaimed to have done in his life, Picardi, 56, is the same man a federal jury convicted of 13 felonies last October, U.S. Chief District Judge Jeffrey Viken said when he sentenced the doctor.

Picardi was charged with income tax evasion after an exhaustive federal investigation of his financial practices spanning 10 years from 1999 through 2009. He used an elaborate network of dummy corporations and several foreign banks to divert thousands of dollars in income.

The indictment says the scheme was hatched with the aid of a Maryland attorney who set up a phony employee leasing scheme to suck taxable income to shell companies, which the surgeon tapped for cash as needed.   This worked fine, until one day it didn’t, and now it’s a five-year unpaid vacation, plus tax, interest and penalties.

There is no Tax Fairy.

 

Jana Luttenegger,  Disclaiming an Inheritance  (Davis Brown Tax Law Blog).  Sometimes it’s better estate planning to turn down an inheritance and let it go to your kids or some other beneficiary.  But you have to do it right:

 Most importantly, the disclaimer must be made before you accept any benefit in the gift, and it must be an unqualified disclaimer. (No, you can’t have a party at the house and then decide you don’t want it.) Once the disclaimer is made, it is irrevocable — you can’t change your mind. If you properly disclaim, the property will pass as if you predeceased (you do not get to direct where the property goes).

 

Arden Dale,  A Strategy for Business Owners to Avoid Investment Tax (Wall Street Journal:

Financial advisers have a simple question for some of their clients who own businesses: Are you an active or passive owner?

For the clients whose businesses are set up as S corporations, the answer is crucial if they want to avoid paying a new 3.8% tax on their income.

So what’s the strategy?  Not being passive.  Easier said than done.  (via Tax Break)

 

Joseph Thorndike, A Lost Age of Fiscal Heroes? Not So Much. (Tax.com):

The looming debate over the federal debt limit is a depressing reminder that we’re living in the Age of the Manufactured Crisis. And it encourages a sort of political nostalgia – a yearning for that bygone era when tough lawmakers made the tough decisions that kept federal debt at manageable levels. Well, sorry to tell you, but there were never any fiscal heroes.

Just politicians who show by their actions that they are happy to spend us to Greece.

 

Jason Dinesen,  Same-Sex Marriage, Community Property, And Multi-State Income — Part 1.  ”Indeed, some of the most complicated tax returns I’ve ever prepared have been for same-sex couples that moved from California (a community property state) to Iowa (not a community property state) during the middle of the year.”

Clint Stretch, Will DOMA Issues Doom Tax Reform?  (Tax.com)

Howard Gleckman,  The Joint Committee’s Report on Tax Reform: Must-read for Policy Geeks:

Think of it as the ballpark program you pick up before a baseball game.  You can watch the game without it, but it is much more fun if you can keep score and know a little something about who plays for the visiting team.

Except much less interesting than baseball, and the players are uglier and less skilled.

 

Kay Bell, Is the online sales tax bill unstoppable? The House will decide

Joseph Henchman,  Senate Approves Expanding State Tax Authority on Internet Sales (Tax Policy Blog)

David Brunori, Go Big or Go Home — Tax Reform in Maine (Tax.com)

Russ Fox,  California Leads the Way (as Worst State for Business).  Iowa is 23rd in the rankings in Chief Executive Magazine.

 

Jack Townsend links to an Article on Prosecuting Tax Professionals to Leverage Deterrence

Patrick Temple-West,  Airline industry’s tax troubles, and more  (Tax Break)

Robert D. Flach,  GETTING READY FOR SUMMER – FILLING OUT FORM W-4 FOR A SUMMER JOB.  With excellent advice about using a Roth IRA for your hard-working kid’s summer work.

 

The Critical Question:  How Difficult Is It to Count Tax Words? (Jim Maule)

But maybe he won’t anyway.  Maybe Mitt Romney Can Recommend a Savvy Tax Planning Professional for Al Gore (Going Concern)

 

 

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Tax Roundup, 5/7/2013: Impressive longevity edition. And revenge of the cat ladies

Tuesday, May 7th, 2013 by Joe Kristan

20120814-2Lauryn Hill’s parents are 150 years old!  The singer received a three-month prison sentence yesterday for failing to file tax returns, but the New Jersey native still may struggle with math, according to the reliable source of tax news, TMZ.com:

“I was put into a system I didn’t know the nature of. … I’m a child of former slaves. I got into an economic paradigm and had that imposed on me,” Hill said.

She continued, “I sold 50 million units … now I’m up here paying a tax debt. If that’s not likened to slavery, I don’t know what is.”

As slavery was eliminated nearly 150 years ago with the passage of the 13th Amendment, Ms. Hill either has difficulty with arithmetic or remarkable parents.  The slavery analogy is interesting.   So if tax is slavery, is President Obama the chief slave driver?  The IRS Commissioner? Can we be sold down the river?  To who?

Update from Althouse:

Ideas that would work perfectly well in song lyrics can sound so wrong in court. The artist describes feelings, impressionistically. It’s in no way an excuse or justification. But sometimes artists/politicos use court as a forum for expression without any expectation that it will advance their legal cause. One can intelligently and consciously eschew persuasion and victory.

Perhaps.  Still, sometimes celebrities just say strange things.

 

TaxGrrrl,  Lauryn Hill Draws Prison Sentence For Tax Evasion 

 

Russ Fox,  Reversing Two Penalties That Should Never Have Been Charged.  The IRS can’t even get its own tax filing deadlines right.  It should be fun to watch them take over the health system.

Jen Carrigan,  A Guide to Advanced Tax Terminology (Guest poster at Missouri Tax Guy)

Patrick Temple-West,  Tax rewrite favored by Republicans, and more (Tax Break)

 

After tax day, a battlefield can seem like a vacation.  A trip to Chancellorsville with Peter Reilly.

 

It’s Tuesday, so it’s Buzz day at Robert D. Flach’s place!

 

Area cat lady ridicules cat tax proposal (Going Concern)

 

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Tax Roundup, 5/3/2013: Return of the Glaciers edition.

Friday, May 3rd, 2013 by Joe Kristan

Tax Update World Headquarters is just a few hundred yards north of the Raccoon River, where the last glacial advance ended about 14,000 years ago.

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Downtown Des Moines, Locust St., this morning.

 Today’s weather makes me wonder whether mastodons eat tulips.

 

TaxProf,  Small Business Owners Sue IRS Over ObamaCare.  I don’t think you can stop a train wreck with a lawsuit.

 

Looking for wounded jaywalkers.  Blogger and tax defense attorney Jack Townsend is looking for “Readers of this Blog Willing to Share Their Personal Experiences in the OVDP/I Programs“:

A reporter for a nationally prominent publication has contacted me to help him get in touch with people who have gone through one of the OVDI/P programs to discuss their experiences and thoughts about the programs.  If you are interested and/or willing to do that, please contact me at jack@tjtaxlaw.com and I will put you in touch with the reporter.

So maybe it’s a chance for those of you who’ve been put through the ringer for a foot-fault violation to get a little justice.

 

Janet Novack,  Pritzker Family Baggage: Tax Saving Offshore Trusts.   My theory is that many of wealthy people who favor higher taxes assume they’ll never have to pay them anyway.

Howard Gleckman,  A New Way to Address the International Tax Mess (TaxVox)

 

Peter Reilly,  IRS Troops Will Take To The Street On Seventh Day In May .  I’m guessing that Peter is referring to the 1960′s  ”Seven Days in May,” about an attempted military coup in the U.S.  I’m not sure whether the National Treasury Employee’s Union, which will “take to the streets,” can pull off a coup, seeing that they pretty much run things already.

 

Nick Kasprak,  Weekly Map: Inheritance and Estate Tax Rates and Exemption (Tax Policy Blog)

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The opposite of a sales tax holiday:  Retailer Target Jumps The Gun On Sales Tax (TaxGrrrl). A South Carolina Target store probably made few friends when it started charging a higher sales tax rate a month early.

Patrick Temple-West,  State Republicans divided on tax cuts, and more (Going Concern).

Christopher Bergin, Taxes Don’t Matter Until, Well, They Matter  (Tax.com):

 

Roger McEowen, Trusts, S Corporations, The Material Participation Test and the  Medicare Passive Income Surtax

Good news!  Are you a likely tax audit target? Sequester just might save you(Kay Bell).

Paul Neiffer:  Full Season vs. Early Season Corn

Jim Maule,  A Slight Improvement in the Code Length Articulation Problem.  No, the Internal Revenue Code is not 77,000 pages.  It’s no less a monstrosity for that.

Daniel Shaviro,  Tax policy colloquium, week 13: Itai Grinberg’s “Emerging Countries and the Taxation of Offshore Accounts”

Friday Buzz from Robert D. Flach

Me:The REIT way to reduce taxes?  My new post at IowaBiz.com, The Des Moines Business Record group blog for entrepreneurs.

Going Concern,  AICPA Attempts to Tie Expired Payroll Tax Cut to Normal American Behavior.

Are you irritable? Sleeping less? Impatient with your friends? Putting on weight? Thinking about divorce? Yes? Sorry to hear, you must be going through a stressful time.

Oh, wait, are you an American? Yes?! Whew, you’re behaving normally then. If you were to read this AICPA press release, you might be inclined to believe that your take home pay being 2% lower than last year would have been the cause of all those things…

What are these “friends” of which you speak?

 

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Tax Roundup, May 1, 2013: Brittannia gets behind filmmakers in a big way. Also: IRS power grab takes a new direction.

Wednesday, May 1st, 2013 by Joe Kristan

hh44.jpgNew U.K. film tax credit indictments.  It appears that the Brits are slowly moving towards the Iowa approach of jailing filmmakers instead of subsidizing them.  Ic.Scotland.co.uk reports:

Five people are to be charged in connection with a film industry tax relief fraud which cost the public purse around £125 million, the Crown Prosecution Service said.

The group allegedly abused a tax relief that allows investors in the British film industry to offset losses against other tax liabilities in order to cheat the public revenue.

“Around £125 million” translates to around $194 million.  And in Iowa film producers are serving time for stealing merely single digits of millions.  It just goes to show what you can accomplish with a national effort.

 

Boo.  House bill would give IRS authority to regulate tax pros (Kay Bell)  The power grabbers at IRS and their buddies at the national franchise tax prep firms have been thwarted by the courts.  Now they are using their congresscritter friends to put in the fix.

Kay sadly falls for it:

The quality independent tax professionals are following tax law changes, staying up to date and providing their clients with reliable tax services. Down the  street, however, an inept preparer is undercutting their prices and mucking up the system for all of us — the IRS, tax pros and taxpayers alike.

The IRS can’t regulate anybody into competency.  They can make people pass a “competency” test that really is a literacy test.  They can make people pay for CPE.  But they can’t make anybody competent who wouldn’t be otherwise.    What they can do is drive little preparers out of the business with nagging paperwork, red tape and hassles that the big boys can just assign to their compliance departments, and, when necessary, to their lobbyists.  This reduces the supply of preparers, increasing the cost of preparation for taxpayers.

The real problem with tax errors isn’t preparers; it’s the horrendous tax law and the inept legislators who make it happen.

 

Jacob Sullum on the Burden of Online Sales Taxes (Reason.com):

In a 2011 paper published by the Mercatus Center at George Mason University, Veronique de Rugy and Adam Thierer recommended “an ‘origin-based’ sourcing rule for any states seeking to impose sales tax collection obligations on interstate vendors.” Under that rule, which mirrors what happens when you buy something while visiting another state, each business collects sales tax on behalf of the state where it is based, no matter where the customer happens to be.

The beauty of this approach is that it treats all retailers equally, eliminates the daunting challenge of dealing with many different taxing authorities, and respects state policy choices while encouraging tax competition between jurisdictions. Evidently the idea makes too much sense for Congress to consider.  

 That would motivate online sellers to locate in low tax jurisdictions, which is why congresscritters from high-tax places will never allow it to happen.

 

Scott Drenkard,  California Considers Soda Tax in 2013, Forgetting Resounding Defeat in 2012 (Tax Policy Blog)

Joseph Thorndike, When Tax Reform Means Soaking the Rich (Tax.com)

Eric Toder,  How to Improve the Tax Subsidy for Home Ownership.  (TaxVox).  Maybe by eliminating it?

Jack Townsend,  John Doe Summons Issued to Wells Fargo for Records of CIBC FirstCaribbean International Bank Correspondent Account

Patrick Temple-West,  FATCA hurts Americans abroad, and more (Tax Break)

 

J.D. Tuccille, If High Cigarette Taxes Fuel a Booming Black Market, What Will High Marijuana Taxes Do?  (Reason.com).

David Brunori, Pancho Villa and Three Hundred Million Joints (Tax.com)

 

News you can use:  How Not to Deduct 85,491 Miles (Russ Fox)

 The Critical Question:  Has Microsoft Excel Ruined the World? (Going Concern)

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Tax Roundup, April 29, 2013: Getting ready for the Obamacare Investment Income Tax. And a disturbing lack of faith in OVDI.

Monday, April 29th, 2013 by Joe Kristan

20121120-2Laura Saunders, Are You Ready for the New Investment Tax?, (Wall Street Journal, via The TaxProf):

The tax, which took effect Jan. 1, applies to the “net investment income” of married joint filers who have more than $250,000 of income (or $200,000 for singles). Only investment income—such as dividends, interest and capital gains—above the thresholds is taxed. The rate is a flat 3.8% in addition to other taxes owed.

“Affluent investors who ignore this tax will be in for a total shock next April 15,” says David Lifson, a certified public accountant specializing in tax at Crowe Horwath in New York. Such income is typically not subject to withholding, and people won’t be factoring it into their estimated taxes. Lower-bracket taxpayers who receive a windfall large enough to owe the tax will also be in for a surprise.

This tax is shockingly complex, and it will surprise a lot of taxpayers next April.

Related: Tony Nitti,  Overview Of The New 3.8% Investment Income Tax, Part 1

 

Feds sue over Des Moines utility tax (Des Moines Register).  Des Moines lost a long legal battle over its “utility tax” on electric bills.  Now the federal government is after the city:

Federal prosecutors acting on behalf of the U.S. Department of Veteran Affairs sued the city of Des Moines and Mid­American Energy Co. on Friday, alleging that the city’s longstanding surcharge on gas and electric customers in Des Moines constitutes an illegal tax when levied against Uncle Sam.

 

Trish McIntire,  W-2Gs and CP2000s:

When a taxpayer wins a jackpot, the casino gives them the W-2G for the win at that time. It’s up to the taxpayer to keep the W-2G safe and bring it into me, or their preparer, when their taxes are done. What happens to the W-2G? It gets shoved into a purse or pocket, thrown in the glove compartment or on the desk at home or thrown in the trash by accident.

Robert D. Flach,  THE MORTGAGE INTEREST DEDUCTION:

I support keeping the deduction for acquisition debt mortgage interest on one’s primary personal residence, and the deduction for real estate taxes on the same primary personal residence, not to encourage home ownership, but as a form of “geographical equalization”.

In other words, he wants to help out people who live in places where houses cost more.  I think that’s misguided, as it also encourages people who live in low-cost locales like Des Moines to build palaces with help from the taxman.

 

Russ Fox,  1700 Miles and a 7% Difference.  Joe Mauer of the Minnesota Twins tries to avoid Minnesota residency for low-tax Florida.  It went about as well as this season will for the Florida Marlins (or the Twins, for that matter).

 

Kay Bell,  Smokers are among the latest federal tax targets.  Transferring nicotine addiction from smokers to government.

Jana Luttenegger,  IRS Announces Furlough Days (Davis Brown Tax Law Blog).

Patrick Temple-West,  Obama talks budget with Republicans, and more (Tax Break)

Paul Neiffer,  Don’t Forget Your Retirement Plan.  “I was talking with a new farm client the other day about his estate plan and what struck me the most was not how much farm land value he had accumulated but rather the amount he had tucked away into his retirement plans.”

Peter Reilly,  Fifth Avenue Inspirational Shopping Not Doing Business. Dang.

 

Phil Hodgen,  Note to Concerned Immigrant:

Get some competent advice about how to handle the past years. If the advice is OVDI, then stand up and walk away, swearing the mightiest oaths that a drunken sailor could swear.

Perhaps the Offshore Voluntary Disclosure Initiative has somehow failed to gain the confidence of the tax bar?

Jack Townsend,  More on the GAO Report on IRS Offshore Disclosure Initiatives

 

Trust me, peasant, it’s for your own good.  Former GM Exec Bob Lutz Suggests Higher Gas Taxes Would Help Americans (TaxGrrrl)

The soft bigotry of low expectations.  The Pioneer Press Has Crowned Its Sexiest Accountant(s)  (Going Concern)

 Now he tells us.  Jailed tax cheat’s warning: Just ‘don’t do it’ (TBO.com)

 

 

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