Posts Tagged ‘Peter Reilly’

Tax Roundup, 3/2/16: It’s your fault. You trusted us! And: don’t get phished.

Wednesday, March 2nd, 2016 by Joe Kristan

coupling20160213Insults always convince the insulted. Those dumb small businesses, thinking Congress and the legislature would do what they have been doing every year. That’s apparently the take of Iowa Senator Robb Hogg, reports the Caffeinated Thoughts blog:

State Senator Robb Hogg (D-Cedar Rapids) was very critical of small business owners and farmers who have contacted their legislators urging their support on coupling with federal tax changes which encourage growth in Iowa’s economy. Even worse, Senator Hogg shifted the blame from the inaction of Senate Democrats to Congress.

“I understand there are a lot of big crocodile tears being shed over this issue,” Hogg said. “Congress is to blame.”

“Those investment decisions have been made and maybe people had this belief that it might or would happen, but that doesn’t justify their claim that they were counting on it.”

Congress has renewed the higher Section 179 limit every year since 2009, and Iowa has coupled with the $500,000 limit since 2010. There was no indication that Iowa would do anything different until the Governor said otherwise in January. Either way, it’s still a big tax increase just as the ag economy is sagging.

I’ll also add that Sen. Hogg misuses the term “crocodile tears.” Per phrases.org.uk:

Meaning

To weep crocodile tears is to put on an insincere show of sorrow.

Origin

The allusion is to the ancient notion that crocodiles weep while devouring their prey. Crocodiles do indeed have lachrymal glands and produce tears to lubricate the eyes as humans do. They don’t cry with emotion though. Whatever experience they have when devouring prey we can be certain it isn’t remorse.

There’s nothing insincere about the sorrow of finding your taxes increased. The term is better reserved for someone who says, gee, too bad we need to take more of your money, but we sure do need to spend it.

Still, the tactic of criticizing your constituents is an interesting approach. It does seems to work on a national level lately.

 

Kay Bell, March arrives not as lion or lamb, but as a fish phish:

In this latest phishing ploy, one of several the IRS has seen surging this tax-filing season, the faux corporate execs are asking for payroll data, including W-2 forms that contain Social Security numbers and other personally identifiable information.

“This is a new twist on an old scheme using the cover of the tax season and W-2 filings to try tricking people into sharing personal data. Now the criminals are focusing their schemes on company payroll departments,” warns IRS Commissioner John Koskinen.

“If your CEO appears to be emailing you for a list of company employees, check it out before you respond,” adds Koskinen. “Everyone has a responsibility to remain diligent about confirming the identity of people requesting personal information about employees.

Just this morning I got an email from someone I never heard of with a heading: “W2 Information EIN: 13-2655998.” Don’t click on this sort of thing. It’s bad news.

 

Kristine Tidgren, A New Farm Year Begins: Pay Taxes and Perfect Landlord’s Lien! (AgDocket)

Hank Stern, Aetna joins the parade (InsureBlog):

Aetna, and its Coventry affiliate, becomes the next major player to cry “no mas” on new business. In email this morning:

We will not pay commissions for sales with coverage effective dates after March 1, 2016, and continuing through December 31, 2016 effective dates.  This applies to on- and off-exchange business.”

If an insurance company doesn’t pay commissions, it’s a safe bet that they aren’t making money on the product.

Robert Wood, To Fight IRS Tax Bills, Go Step By Step

 

William Perez, Tax Advice for Cannabis Entrepreneurs. Interestingly juxtaposed with another post:

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It’s certainly conceivable that someone could find both posts useful.

 

Jason Dinesen, Sometimes I Wish I Could Just Prepare 1040-EZs.

 

 

Scott Drenkard, Celebrating 75 Years of Facts & Figures (Tax Policy Blog):

Today we released the 2016 edition of Facts & Figures, our pocket- and purse-sized booklet on quick tax facts. This publication has a long history—it dates back to 1941, when our think tank (which was just four years old at the time) published a booklet that was both a source of otherwise hard-to-find government data, and also a treasure trove of infographics to illuminate that information.

The Tax Foundation continues to be a valuable source of tax data and analysis, even though some folks don’t like the math.

TaxProf, The IRS Scandal, Day 1028

Renu Zaretsky, What comes after a big night for Clinton and Trump? The TaxVox headline roundup covers the Super Tuesday results and other tax news.

News from the Profession. FLASH: Sales, Accounting Personnel Face Pressure to Meet Revenue Goals (Caleb Newquist, Going Concern).

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Tax Roundup, 3/1/16: Iowa-only preparer regulation dies unmourned.

Tuesday, March 1st, 2016 by Joe Kristan

20151124-1Bwahahaha! Tax pros across Iowa can continue to pillage their poor unsuspecting clients, and there’s nothing you can do about it!

What? You aren’t being pillaged? You are free to hire and fire a tax preparer or consultant who is incompetent, or who charges more than you want to pay? Then maybe it’s not such a tragedy that a bill to license and regulate tax preparers in Iowa, SSB 3135, died in the Iowa legislature at the “funnel week” deadline. The bill, sponsored by the Chairperson of the Iowa Senate State Government committee, “requires the Iowa accountancy examining board to license all persons who wish to practice as tax consultants or tax preparers.” As Russ Fox and Jason Dinesen note, it would exempt attorneys and CPAs while covering enrolled agents.

The proposal has all of the bad features of the abortive federal tax practice regulation, plus the additional flaw of making tax preparation in Iowa more expensive than in other states.

Occupational licensing is a crony capitalist job killer, and observers across the spectrum, from The Des Moines Register to the Koch Brothers have figured this out. SSB 3135 dies unmourned.

 

Russ Fox, Frivolity Has a Price: $19,837.50. In case you’re wondering why your attorney won’t help you argue that you don’t have to pay taxes because the judge has gold fringe on his flag, Russ can help you.

TaxGrrrlFiguring Out Taxes, Pay And More On Leap Day: Are You Working For Free Today?

Peter Reilly, Colorado Can Force Vendors To Rat Out Residents On Use Tax. Oh, boy.

Keith Fogg, Judge Paige Marvel Will Become New Chief Judge of the Tax Court on June 1 (Procedurally Taxing).

Robert Wood, 9 IRS Audit Tips From The Trump Tax Flap. I’m not sure how universal these tips are.

Kay Bell, Cruz & Rubio release taxes, challenge Trump to do same

Jim Maule, Should Candidates Be Required to Release Tax Returns?  I think they should be required to prepare them by hand on a live webcast.

 

Scott GreenbergThe Most Popular Itemized Deductions (Tax Policy Blog):

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“Out of the 44 million households that itemize deductions, almost 43 million deduct the taxes they pay to state and local governments.”

 

TaxProf, The IRS Scandal, Day 1027

David Henderson, Henderson on the Case Against a VAT (Econlog).

Greg Mankiw, Misunderstanding Marco. “The Rubio plan is essentially the X-tax designed by the late Princeton economist David Bradford.  It is a progressive consumption tax.”

Tyler Cowen, The regulatory state and the importance of a non-vindictive President. That ship sailed seven years ago, and its return isn’t on the horizon, given the polls.

Renu Zaretsky, Disputes, Development, Filing, and FuelToday’s TaxVox roundup covers ground from Google’s international tax issues to lax security protocols from IRS “free file” providers.

 

Career Corner. Crackin’ Under Pressure: Making Mistakes During Busy Season (Caleb Newquist, Going Concern). “Regardless, mistakes are always mortifying to those who make them and, regardless of what you think, EVERYONE MAKES THEM.”

 

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Tax Roundup, 2/29/16: Governor wants to couple Sec. 179 for 2015 only. And: Iowa Farm 1040s due April 30.

Monday, February 29th, 2016 by Joe Kristan

20120906-1One year for you, forever for them. It turns out there’s a catch to Governor Branstad’s change of heart on conforming with the $500,000 federal Section 179 deduction. He only wants it for one year.

O. Kay Henderson reports:

Branstad did not include this recommendation in the plans he submitted to legislators in January. Republicans in the House have voted to make this tax break available to about 177,000 Iowa small business owners and farmers who’re filing their taxes right now and the Republicans in the legislature would like to make it permanent, but Branstad says he’ll only accept a one-year extension.

“We’d lose too much revenue,” Branstad says, “and it would put us in a financial position that we couldn’t sustain it for the long term.”

The Section 179 deduction allows taxpayers to deduct the cost of up to $500,000 of equipment that would otherwise have to be capitalized and depreciated. It is reduced dollar-for-dollar as purchases exceed $2 million, so it only benefits smaller businesses. The Governor would limit the deduction to $25,000, with the phase-out starting at $200,000. With the cost of a combine often in excess of $200,000, the Governor’s plan would increase taxes for many farmers.

The $500,000 has been passed a year or two at a time by Congress, and Iowa has gone along each year since 2010. Congress enacted the $500,000 limit permanently late last year, effective starting in 2015. Many practitioners were surprised when the Governor announced at the beginning of this legislative session that he opposed conforming to the federal limit. The Iowa House overwhelmingly voted for conformity anyway, and it would likely pass in the Senate if Majority Leader Gronstal would allow a vote.

While the Governor says the state can’t afford the $90-95 million cost of Section 179 for smaller businesses, he has plenty of money for tax credits for big companies. Here is what his 2017 budget provides for incentive and economic development tax credits:

Iowa credits fy 2017

So, according to the Governor, while the state can’t afford $90 million for small businesses buying equipment, except maybe for one year, it can afford three times that for big companies and well connected insiders, forever and ever.

People are starting to figure it out, including The Des Moines Register, which ran an editorial yesterday, End subsidy for big companies:

Last year, the state sent checks for $42.1 million to 186 companies under the research activities program, the Iowa Department of Revenue reported.

80% of that went to just eight companies.

Research and development is essential for corporations to compete in a high-tech world. Should taxpayers give big corporations a subsidy for doing this basic business function?

No, concluded a Special Tax Credit Review panel in 2010. Gov. Chet Culver appointed the panel after the film tax credit scandal. The panel recommended eliminating the refundability of the research activities credit for companies with more than $20 million in gross receipts.

“It seems unreasonable for the state to be providing successful, larger corporations refund checks for amounts of the Research Activities Tax Credit over its tax due to the state,” the panel concluded.

Unreasonable, indeed. The panel made other recommendations, including capping tax credits to businesses and providing a five-year sunset on all tax credits, requiring the Legislature to vote to continue them. Lawmakers largely ignored the recommendations.

It’s nice to see someone else remembers the Culver review panel. It found no clear benefit to any tax credit program. But while politicians can issue a press release when a big company gets a $14 million tax credit, nobody gets to cut a ribbon when a farmer buys a new tractor.

Related: Iowa extends Farmer 1040 due date to April 30.

 

Remember when the film credit repeal was going to kill the Iowa film industry? Film, Television Production Thriving in Iowa (KCRG.com). Whenever someone suggests that we kill film credit programs, the economic development people warn that nobody will stay in Iowa if we don’t pay them to.

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Laura Saunders, IRS Says Cyberattacks on Taxpayer Accounts More Extensive Than Previously Reported; Tax data for about 700,000 households might have been stolen (Wall Street Journal). When this first came out, the IRS said 114,000 taxpayers were affected. Then it was 334,000. Are they done yet? The TaxProf has more.

Related: 

Math Is Hard, IRS Edition (Russ Fox). The actual number was more than 700,000. And the unsuccessful attempts didn’t total 10,000; they totaled 500,000!”

IRS: Efforts To Access Taxpayer Accounts Twice As Bad As Originally Thought (TaxGrrrl)

 

Kristine Tidgren, Gifted Assets and Divorce: Nothing is Certain (Ag Docket)

Paul Neiffer, Iowa Farmers Have Until April 30 to File Iowa Tax Returns

Jason Dinesen, Glossary: Iowa Form 126

William Perez, Served Time and Later Found Not Guilty? You Could Be Due a Refund

Annette Nellen, Trailing Nexus – Extra Complexity. “As if it isn’t already difficult enough for a business to know if it has income or sales tax nexus in a state, it might have ‘trailing nexus.'”

Keith Fogg, Private Debt Collection. “Adding non-IRS employees who will contact taxpayers will further confuse taxpayers already receiving calls from scam artist trying to shake them down in the name of the IRS and create other problems as well.”

 

Joseph Thorndike, Forget the Audit: Trump Should Release His Tax Returns Today (Tax Analysts Blog)

Kay Bell, IRS audit doesn’t prevent Trump from releasing taxes

Alan Cole, Why Marco Rubio and Ted Cruz’s Tax Plans Generate More Growth than Donald Trump’s (Tax Policy Blog)

Peter Reilly, Sanders Tax Plan Harder On Millionaires Than Billionaires

TaxProf, The IRS Scandal, Day 1024Day 1025Day 1026.

 

Robert Wood, Oscar Academy Sues Over Racy $230,000 Gift Bags. They want more?

 

 

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Tax Roundup, 2/23/16: Governor Branstad reverses stand, now supports Section 179 and other extenders.

Tuesday, February 23rd, 2016 by Joe Kristan

coupling20160213Found money. Governor Branstad started out this legislative session saying the state couldn’t afford the $500,000 Section 179 deduction ever again. He also said the state couldn’t afford to couple to any other 2015 federal tax “extenders.”

Never mind.

The Governor’s office confirmed yesterday that it has decided to support the House-passed coupling bill, HF 2092. The House bill conforms to all 2015 federal extenders, including a permanent $500,000 Section 179 deduction. The Section 179 deduction allows taxpayers to deduct in the year of purchase equipment costs that would otherwise be capitalized and deducted over a period of years through depreciation.

The fate of the extender bill now is in the hands of Senate Majority Leader Gronstal, who controls which bills can come to a vote in the Democrat-controlled chamber. Sen. Gronstal and chief Senate taxwriter Joe Bolckom have announced their support for the Governor’s now-abandoned anti-coupling position. That means they now have a bargaining chip. From O. Kay Henderson:

Senator Mike Gronstal of Council Bluffs, the top Democrat in the legislature, said Senate Democrats are willing to pass these tax cuts, if Republicans are willing to adjust tax policy elsewhere. Gronstal suggested doing away with the $40 million tax break the Branstad Administration unilaterally gave manufacturers.

So now it’s a hostage negotiation.

The Governor’s office hasn’t said where he found the funding for the extenders on his road to Damascus, reports The Des Moines Register:

Spokesman Ben Hammes said in an email Monday that the governor now supports the bill, “given we can still fund the budget priorities of Iowans.” Hammes did not respond to direct questions about how Branstad would calculate the budget differently without funding concerns.

20151118-1I like to think that the Governor’s budget math was altered by a rebellion of his partisans in the General Assembly. Every Republican who voted on the House bill voted against the Governor’s position, and their minority contingent in the Senate would likely do the same thing.

While Section 179 is the biggest revenue item in the extender package, there are a number of other 2015 tax breaks at stake, including:

Exclusion for IRA contributions to charity
Exclusion of gain from qualified small business stock
Basis adjustment for S corporation charitable contributions
Built-in gain tax five-year recognition period
Educator expense deduction
Exclusion of home mortgage debt forgiveness
Qualified tuition deduction
Conservation easement deductions
Deduction for food inventory contributions

The Department of Revenue has warned taxpayers that they have no authority to claim these breaks until the legislature acts. The Department has so far provided no guidance so far on how to report some of these items, such as the exclusion for IRA charitable distributions.

I think the prospects for eventual Senate passage, which appeared bleak as recently as Friday, now are favorable. House Democrats also voted in favor of the House bill, 26-14. There is no reason to believe Senate Democrats feel differently. So while Sen. Gronstal can be expected to extract concessions, probably in spending priorities, he probably is under some pressure from his own caucus to move the bill. I don’t expect the Governor to surrender the manufacturing sales tax exclusion in any deal.

If the Governor and the legislature need to find some revenue to help make it up, I have a handy list of revenue ideas for them.

Related: Prior Tax Update Coverage.

 

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TaxGrrrl, Presidential Campaign Spending & That Checkbox On Your Tax Return, “In 2007, less than 10% of taxpayers checked the box and in 2013, only about 6% of taxpayers checked the box.”

Robert Wood, Dear IRS: Like Apple And Google, I’m Offshore For Taxes. Moving money offshore for taxes isn’t very practical, despite what some people who want to harass people with non-U.S. holdings even more seem to think.

Keith Fogg, Calculating Interest When the IRS Makes a Restitution Based Assessment (Procedurally Taxing)

Peter Reilly, IRS Rules Bingo Is For Charities Not A Charity In Itself. “Somehow I had managed to get through over 35 years of tax practice without realizing a portion of the Internal Revenue Code is dedicated to bingo –  Section 513(f) – Certain bingo games.”

Jason Dinesen, Glossary: Balance Sheet. “A balance sheet is a summary of a business’s assets, liabilities and equity.”

Kay Bell, 9 states considering gasoline tax hikes

Jack Townsend, NPR Planet Money Podcast on a Tax Protestor. “The show goes through basic tax and criminal law related to tax protestors / deniers.”

Paul Neiffer, If You Don’t Pay Income Taxes, You Lose the Farm! “It is almost always best to pay your taxes when they are due; otherwise you may end up losing the farm, just like Mr. Sanders.”

 

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TaxProf, The IRS Scandal, Day 1020. IRS continues to hold up Tea Party exemption applications. 1020 days later.

Scott Greenberg, Who Itemizes Deductions? (Tax Policy Blog). “When it comes to households with incomes over $75,000, a significant majority itemizes deductions:”

Jeremy Scott, A ‘Brexit’ Would Mean More if Labour Were In Power (Tax Analysts Blog). “It’s hard to know exactly what a post-exit United Kingdom would look like because neither political party has spelled out what leaving the EU would mean. But there would probably be much more continuity on the tax side than in other important financial areas — that is, unless the Conservative government fell as a result of the referendum and Labour took its place.”

Renu ZaretskyA Budget, Carbon, Fuel, the Environment… and a Revolt. Today’s TaxVox headline roundup covers a putative House GOP budget deal, carbon taxes, and gas tax hikes by the states.

 

Caleb Newquist, A Short List of Things Donald Trump Has Said About Releasing His Tax Returns (Going Concern). The list doesn’t include anything about, “they will be awesome,” but “they will be very good.”

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Tax Roundup, 2/22/16: DuPont spurns Iowa, as tax rates would predict. And: What Sec. 179 decoupling will cost Iowa farmers.

Monday, February 22nd, 2016 by Joe Kristan

20160222-1Taxes aren’t everything, but they are a thing. With the merger of DuPont and Dow, Iowa hoped the headquarters of the merged company would be in Central Iowa, home of the big DuPont Pioneer seed operation. It didn’t work out that way. It did work out the way you would think it would, though, if you looked only at tax rates.

First, O. Kay Henderson brings us up to date:

DuPont bought Iowa-based Pioneer Hi-bred International in 1999. Now, as the merger of chemical giants DuPont and Dow continues, company executives have decided the corporate headquarters will be in Wilmington, Delaware.

Iowa officials had offered the company millions if it had picked Johnston, where DuPont Pioneer has been based.

An agricultural unit of the newly-merged company will remain in Johnston. State officials are giving the company $14 million in research activities tax credits and a two million dollar forgiveable loan. It appears up to 500 people will work in the research facilities. More than 2600 people currently work at DuPont Pioneer in Johnston.

In short, the corporate headquarters will be in Delaware, but the company will continue to do seed research here, and collect taxpayer money too. That’s precisely the result one would anticipate based on The Tax Foundation’s Location Matters report on effective state taxes on different activities. The key numbers in choosing between Delaware and Iowa:

Iowa v Delaware 20160222

Iowa has one of the worst tax structures for corporate headquarters. Iowa’s 20.4% effective rate on a “mature” corporate headquarters is half-again higher than the rate in Delaware. Iowa’s highest-in-the-nation 12% corporate tax rate has something to do with that, as does its bad habit of subjecting business inputs to sales tax.

Because Iowa subsidizes research activities generously through the refundable research activities credit, its taxes on R&D facilities are significantly lower.

I don’t believe that taxes are the only thing corporations look at in location decisions, but to say they don’t matter defies basic economics and common sense. If you think taxing cigarettes and soda pop affects individual choices, it’s weird to say that taxing corporate headquarters doesn’t affect corporate choices.

20120906-1The DuPont decision is the natural consequence of Iowa’s policy of paying to lure and subsidize new companies, using high taxes from existing businesses. It’s like a guy bringing his wife’s purse to the tavern to buy drinks for the girls. The girls may take his money, but they realize he’ll do the same thing to them that he’s doing to his wife, so the smart ones aren’t going home with him. And any girls he “wins” aren’t likely to be great prizes.

Some of the politicians are figuring this out: Senate GOP Leader says DuPont Pioneer move shows need to eliminate income tax (O. Kay Henderson, again):

Bill Dix of Shell Rock, the Republican leader in the Iowa Senate, suggests this should be a wake-up call for state policymakers.

“Really shines a beacon on the fact that we are a very high-tax state,” Dix says, “one of the highest taxing states in the country.”

The State of Iowa is providing the company $14 million in research tax credits for the retention of up to 500 high-paying “R-and-D” jobs in Johnston. Dix says this corporate decision shows it’s time for a discussion of eliminating the state income tax.

“We tend to have had a policy of looking at what we can do to pick winners and losers and bring certain industries to our state and to some degree that has been successful,” Dix says. “…The states that are growing the fastest are the states that recognize that an income tax is a tax on productivity, hard-work, investment.”

Exactly. Unfortunately, the Governor and his unlikely Democratic allies in the state Senate are doubling down on their commitment to fund targeted tax breaks with high taxes on existing businesses. They are surprising Iowa businesses with a 2015 tax increase by refusing to adopt the increased Federal $500,000 Section 179 deduction and other federal tax breaks renewed in December.

Related: 

Corporate giveaways hurt Iowa (Steve Corbin). While I share his feelings about Iowa’s economic development bureaucracy, they don’t control most research credits.

Taxpayers May Lose Deductions Due to Legislative Inaction (Public News Service)

 

Paul Neiffer, How Much Will Farmers Pay to Iowa For Low Section 179:

Therefore, we would estimate that not coupling with federal Section 179 will cost Iowa Farmers between $40 and $75 million in 2015.  Since Iowa says this will be a permanent non-coupling, Iowa Farmers will face similar costs in the future (although it may get smaller each year due to increased depreciation deductions on amounts not allowed for Section 179).

I’m sure they’ll feel better about that when they think of the $14 million going to DuPont.

 

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Institute for Justice, Victory Over the IRS: IRS Returns N.C. Man’s Entire Life Savings After Seizing It Through Civil Forfeiture. Good. But why did he have to fight so hard when the IRS never said that he had cheated on his taxes?

Rose Heaphy, Internal Revenue Service scam haunts Des Moines woman (KCCI.com). If the caller says he’s from the IRS, he isn’t.

Kay Bell, Driving down your tax bill with auto-related deductions

Jason Dinesen, How is the Iowa Trust Fund Tax Credit Calculated?

Jim Maule, Yes, Damages for Emotional Distress Are Gross Income. “It is time for the distinction to be eliminated, but until and unless that happens, taxpayers are caught by it and must file their returns in compliance with what section 104 provides.”

Kenneth Weil, Will Bankruptcy Get Your Passport Back? (Procedurally Taxing).

Peter Reilly, Should enQ Get To Sell Spots In IRS Phone Queue? “Long wait times on calls to the IRS are nothing new.  But now there is something you can do about it – maybe.  Only it will cost you.  And the whole notion has me angry.” Weird and fascinating.

TaxGrrrl, Fraud Allegations At Liberty Tax Franchises Raise Questions

Russ Fox, Where I Became the “Messenger of Doom” (My Final Comments on Turf Rebates). Nice work if you can get it.

Robert WoodCrazy Sounding Tax Deductions That IRS Says Are Legit. “Cosmetic surgery costs are usually non-deductible, but an exotic dancer named Chesty Love tested this rule.”

 

TaxProf, The IRS Scandal, Day 1017Day 1018Day 1019. I’m featured on Day 1016, and Peter Reilly is spotlighted on Day 1018.

Alan Cole, Which Places Benefit Most from State and Local Tax Deductions? ( Tax Policy Blog). It has a wonderful map where you can find the answer county by county:

 

Map by Tax Foundation.

Len Burman, The GOP Proposed Tax Cuts Would be Unprecedented (updated) (TaxVox)

Career Corner. Bonus Watch ’16: Underachievers. (Caleb Newquist, Going Concern). “Good news for the lion’s share of you who are unexceptional: you’re getting paid!”

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Tax Roundup, 2/18/16: Lax IRS data security exposes taxpayer info. And more news!

Thursday, February 18th, 2016 by Joe Kristan

No Walnut STMaking it easy for the thieves. An appalling story in Tax Analysts today tells how the IRS leaves e-file identification numbers vulnerable: Flawed Authentication May Have Exposed E-File PINs ($link Now ungated – thanks, Tax Analysts!). Luca Gattoni-Celli writes on how primitive verification procedures facilitated an automated attack that compromised up to 101,000 taxpayers:

Jeffrey Eisenach, a visiting scholar at the American Enterprise Institute, characterized the IRS’s single-factor authentication process for the e-file PIN application as totally inadequate.

“The authentication that they are using now is something out of the 20th century,” said Eisenach, who directs AEI’s Center for Internet, Communications, and Technology Policy. “It’s hard to believe that the U.S. government checkbook would be so poorly protected in 2016.”

When asked about the apparent authentication requirements, Joseph Lorenzo Hall, chief technologist at the Center for Democracy & Technology, also said he found them disturbing.

SSNs, dates of birth, and the other required information described on the IRS Web pages “are not adequate as authenticators because they’re not secret,” Hall said. “These things are easy to discover about people,” he added, noting that stolen SSNs, which he said were created as identifiers, not security keys, are widely available on the dark Web.

Hall said the authentication process described on the IRS Web pages would have made the e-file PIN program extremely vulnerable to an automated attack of the type the IRS disclosed.

Yet the IRS insists they are ready to take on preparer certification too.

 

Flickr Image courtesy donjd2 under Creative Commons License.

Flickr Image courtesy donjd2 under Creative Commons License.

Scott Greenberg, A Proven Strategy for Boosting Investment (Tax Policy Blog):

At least within the field of tax policy, there is a simple and obvious policy solution for encouraging investments: ending the disincentive for business investment in the U.S. tax code.

Generally, U.S. businesses are allowed to deduct expenses in the year that they occur. However, when it comes to capital expenses, businesses are required to spread out the deduction over time periods ranging from 3 to 50 years. As a result, the U.S. tax code does not allow businesses to deduct the full cost of capital investments, in present value terms; in a recent paper, I estimated that, over time, corporations are only able to deduct 87.14 percent of the costs of investment.

In other words, the U.S. tax code distorts business decision-making by encouraging businesses to spend their money on salaries, ordinary expenses, and paying down debt (all of which lead to an immediate deduction) and not to spend their money on investment (which leads to a delayed and reduced deduction). If businesses were allowed to immediately deduct the full cost of their capital investments – a policy known as full expensing – this distortion would disappear.

The Section 179 deduction does this on a small scale, but Iowa’s political leadership is having none of it.

 

KIWAradio.com, Donations Dwindle For Chickadee Checkoff. “Donations to the Fish and Wildlife Fund, also known as the “Chickadee Checkoff,” go directly to research and habitat development for some of Iowa’s most vulnerable animal species. The checkoff was created by state lawmakers in 1981. At its height, Iowans donated more than $200,000 annually to the fund.”

Kay Bell, H&R Block CEO says some tax simplification necessary. But not enough to make people stay away from H&R Block!

Peter Reilly, Oxymorons In The Tax Law Can Not Be Fixed With Clever Ideas. “The clever idea that Larry and Dora Williams had was to generate some passive income to abosorb their passive losses.”

Joni Larson, Changes to the Rules of Evidence Applied in the Tax Court (Procedurally Taxing).

TaxGrrrl, Understanding Your Tax Forms 2016: 1099-DIV, Dividends And Distributions.


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David Brunori, Transfer Pricing Is All the Rage — in the States (Tax Analysts Blog). “When proving arm’s-length pricing, the side that can spend the most on good lawyers, accountants, and economists almost always wins.” That’s where kangaroo courts come in.

TaxProf,The IRS Scandal, Day 1015. Why would you think it odd that the IRS hasn’t acted on an exemption application for six years, you silly wingnuts?

Renu Zaretsky, Simple is as simple costs. Today’s TaxVox headline roundup covers the Cruz tax plan, on-line sales tax legislation, and tax finagling involved in financing the Harry Potter films.

 

Is there anything they can’t do?

Clinton Calls for Expanding Housing Tax Credits (Tax Analysts, subscriber link)

H.R. 4563 Would Provide Credit for Zika Vaccine Research (Tax Analysts, subscriber link)

 

News from the Profession. Tax Season Scares Millennials (Caleb Newquist). That just means they’re paying attention.

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Tax Roundup, 2/17/16: Nationwide ‘unregulated’ tax practice regulated out of business. And: Where’s Roger?

Wednesday, February 17th, 2016 by Joe Kristan

20150921-1The Wild West of Unregulated Tax Practice. Well, not entirely: Federal Court Shuts Down Nationwide Tax Preparation Business (Department of Justice):

A federal court in Chicago has ordered Servicios Latinos Inc. to close its nationwide tax preparation business, the Justice Department announced today.  The order comes after the Justice Department filed a civil lawsuit against the business and its owners, Georgina Lopez, Pamela Miranda and Jorge A. Miranda, alleging that the defendants falsely understated their customers’ tax liabilities or overstated their customers’ entitlement to a tax refund.  The injunction also prohibits Lopez, Pamela Miranda and Jorge Miranda from acting as federal tax preparers, owning or operating tax preparation businesses and employing tax preparers.  The defendants agreed to entry of the injunction, but did not admit the allegations in the complaint.

The abortive IRS preparer program had an ethics component. I’m sure that this would never have happened if the barred preparers had attended a one-hour ethics CPE course.

They were successful, until now:

According to the complaint, Servicios Latinos operated out of approximately 84 stores in as many as 30 states, with locations including Kennet Square, Pennsylvania; Kansas City, Missouri; and Las Vegas, Nevada. 

They probably had many clients who were delighted at the big refunds that the stodgy preparers down the street were too timid to claim. The press release says the now-closed firm’s alleged stock in trade included phony child tax credits and earned income tax credits. Sometimes a big refund can turn out to be expensive. Now their satisfied clients can look forward to their “Dear Taxpayer” letters.

This shows that the government has powerful tools to shut down bad actors. Regulation would not improve the conduct of good preparers, but it would saddle them with useless expense and paperwork. It’s just another form of occupational licensing, this time to the benefit of the national tax prep franchise outfits.

 

RMceowenPaul Neiffer, Welcome Aboard Roger McEowen:

Roger just recently left the Center For Agricultural Law and Taxation (CALT) at Iowa State University and I am pleased to let everyone know that he has agreed to join CliftonLarsonAllen as a tax director for our Agribusiness and Cooperative group.  He will be based out of Des Moines and will continue to do his normal seminars around the country and provide additional advice for our clients on income and estate tax and succession planning (along with other advice).

Roger recruited me as a speaker for the CALT Farm Tax Schools for the past several years. Congratulations, Roger, on your move to the private sector!

 

186 companies get refunds under Iowa R&D tax credit (Des Moines Register):

Critics of the program have questioned why so few companies claim such a large part of the tax credits. They’ve also questioned why the state is providing companies with money when it faces tight budgets.

Supporters of the research activities tax credit, however, have said the tax credit helps the businesses decide where to locate and where to conduct their research. Providing the tax credit helps spur investment in Iowa, some have said.

People who get free money always have good reasons why it should keep coming.

Related: What Iowa considers more important than Sec. 179. 

 

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Jason Dinesen. Glossary: Form 8332. “Form 8332 is a tax form signed by a custodial parent to release their claim to a dependency exemption for a child and give it to the non-custodial parent.” It’s a wonderful way to enable parents to continue fighting long after the divorce is final.

TaxGrrrl, Understanding Your Tax Forms 2016: Form 1099-INT, Interest Income. “The ‘FATCA filing requirement’ box is ticked if the information reported on this form is required by rule or statute to comply with the Foreign Account Tax Compliance Act (FATCA). If this box is checked, you may have your own FATCA related reporting requirements, including the filing of a Report of Foreign Bank and Financial Accounts (FBAR).”

Russ Fox, Board of Equalization Excoriated for Ignoring the Law and Binding Precedents, “This is just another reason why the business climate in California is so dreadful.”

Kay Bell, Louisiana budget gap could shut down LSU football. The most important function of the state university system, apparently.

Jack Townsend, The Revenue Rule: Is It Relevant Any More? Should It Be? “Historically, the ‘Revenue Rule’ has been a barrier to one country seeking to collect taxes in another country.”

Keith Fogg, Why is the IRS Collecting Taxes for Denmark? ({rocedurally Taxing)

Peter Reilly, How Valid Is Tax Foundation Dynamic Scoring? It’s all modeling, which is always questionable. Still, taxes do matter. The same people who insist 70% tax rates won’t be ruinous insist soda taxes affect behavior. They’re half right that way.

Robert Wood, Kim Kardashian + Kanye West File Taxes Separately. Maybe You Should Too. If I were married to Kim Kardashian, I absolutely would.

 

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Ajay Gupta, Justice Scalia’s Tax Law Jurisprudence—Just as Acerbic and Prophetic (Tax Analysts Blog). “In cases involving the interpretation of federal tax statutes, Scalia brought to bear his general disdain of legislative history.” And he was not a friend of commerce clause challenges to state taxes.

Michael Schuyler, What Would The Administration’s $10 Oil Tax Do To The Economy And Federal Revenue? (Tax Policy Blog). It would go into, among other things, “high-speed rail.

Howard Gleckman, Cruz’s Flat Tax + VAT Would Cut Revenues By $8.6 Trillion. If only there were a candidate with a plan that would improve the tax system and not increase the deficit

TaxProf, The IRS Scandal, Day 1014

Tax Justice Blog, Tax Justice Digest: Voodoo Economics — Corporate Tax Watch — Social Contract. Check out what the left side of the tax conversation is up to. Oddly, the words “social contract” don’t show up in the post. Maybe because I never signed it?

 

News from the Profession. Would an Accountant Ever Fall for a Phony IRS Call? “And if a CPA did get duped, it’s not like he or she could tell anyone about it. If they did, they’d literally die from the embarrassment.”

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Tax Roundup, 2/16/16: What Iowa considers more important than Sec. 179. And: Iowa’s sunniest counties!

Tuesday, February 16th, 2016 by Joe Kristan

Why we can’t have nice things, like the Section 179 deduction. Did you know the State of Iowa pays cash grants of $44.4 million to businesses every year? And that millions of dollars of these grants go to some of the largest corporations operating in Iowa?

capitol burning 10904The Iowa Department of Revenue has issued its 2015 Research Activities Tax Credit Annual Report. It is a rare and valuable example of transparency in the tax credit world. It discloses the total of Iowa’s research credits claimed in 2015, including the amount paid in cash subsidies. It also lists all recipients of over $500,000 in credits in 2015.

The Iowa Research Activities Credit — unlike the federal version — is refundable. That means if the credits exceed the taxpayer’s Iowa tax for the year, Iowa pays the taxpayer the difference in cash — a subsidy run through the tax return. Multistate corporations with most of their sales outside of Iowa, but who conduct research here, can have low Iowa tax and claim big cash refunds through the program.

According to the report, $57,147,847 in research credits were claimed in 2015. Corporations claimed $50,112,443. Individuals claimed the remaining $7,035,404, presumably as owners of partnerships and S corporations

The “refunded” amount — the amount paid as cash to taxpayers whose credits exceeded their Iowa tax for the year, was $44,428,444. The overwhelming majority of this, $42,078,611, was refunded to corporations. As a percentage of the credits claimed, just a hair under 84% of the 2015 credits for corporations were in the forms of cash grants claimed on tax returns.

Eight taxpayers claimed tax credits in excess of $1 million in 2015:

Source: Iowa Department of Revenue

Source: Iowa Department of Revenue

Assuming that the 83.97% portion of corporate credits applies to these recipients, that means about $29.5 million in cash grants were paid to just these eight corporations. Applying that percentage to individual companies, that translates to $10.1 million cash to Rockwell Collins, $6.2 Million to DuPont, and $1.4 million to Monsanto. To be clear, the report doesn’t disclose the actual refundable amount for any individual taxpayer, so those percentages are not correct for any taxpayer — some are higher, some lower. Considering these eight taxpayers account for 61.6% of the Iowa Research Activities Credits claimed by corporations in 2015, the numbers can’t be far off as a group.

And that gets us back to the Section 179 deduction. The Governor has concluded that the state budget can no longer support the $90 million revenue loss from coupling with the federal $500,000 Section 179 deduction. Section 179 allows businesses to deduct capital investments that would otherwise be capitalized and deducted over a period of years — typically five to seven. It is only allowed for taxpayers with new fixed assets of up to $2.5 million in a year, so none of the research credit recipients above qualify. It is, however, a big deal to smaller farmers and manufacturers in every county.

The state instead proposes to limit Section 179 to $25,000 for 2015 and beyond, with the limit phasing out dollar-for-dollar as fixed asset additions exceed $200,000. That means a single combine can blow a farmer past the new limit. Because the state coupled with the federal $500,000 Section 179 from 2010 to 2014, this amounts to a significant and unexpected tax increase for 2015. It comes at a time when many of the businesses that use Section 179 are hitting a rough patch due to the decline in commodity prices.

Section 179 is a classic Main Street deduction. The Governor finds plenty of room in the budget to fully fund Research Credit cash grants to big corporations, but not for capital equipment deductions for smaller Iowa corporations. Priorities, I guess.

 

Sunshine! The state has issued another report, this one showing where the state tax credit for solar power installations is claimed.

2012-2015 solar credit claims iowa

Based on this, the sun shines brightest in Northeast Iowa. Winneshiek County has a population of 20,768. With more than 100 solar installations, that means there is at least one solar array for every 207 residents. It also means there is a contractor up there selling solar arrays — and solar credits — pretty hard. In other words, Iowa pays sales incentives to heating contractors with your tax money.

 

O. Kay Henderson, ‘Prospect Meadows’ seeks ‘Field of Dreams’ tax break. Tax breaks are like feeding squirrels. Feed one, and they all show up.

William Perez, What You Should Know about Filing an Amended Tax Return

Peter Reilly, Easement Deductions – A Place In Greenwich Village And A $25 Million Eagles Nest. “If you sincerely want property you own to be preserved indefinitely in its current form, a charitable easement deduction is as close as you can come to a free lunch.” But there’s a devil in the details.

TaxGrrrl, How Former President Washington Dealt With The First Real Tax Crisis In America

Kay Bell, How taxes have — and haven’t — changed since JFK became the first president to visit IRS headquarters

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Allan Sloan, The Executive Pay Cap That Backfired (ProPublica). “A while back, Congress voted to curb soaring compensation for corporate officers by limiting tax deductions. Here’s how it went wrong.” (Via the TaxProf).

Stuart Gibson, It’s Still Groundhog Day, at Least in America. (Tax Analysts Blog) “Countries with parliamentary systems, like the U.K. and Ireland, have lowered corporate tax rates and adopted other business-friendly tax measures almost overnight.”

Renu Zaretsky, A Definite Crisis, Maybe an Evasion, and Lots of Talk. Today’s TaxVox headline roundup covers the Louisiana budget “hot mess,” Ikea taxes, and tax talk in last Saturday’s GOP debate.

TaxProf, The IRS Scandal, Day 1013

Robert Wood, Kanye West’s Tax Free $1 Billion From Mark Zuckerberg

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Tax Roundup, 2/15/16: President’s Day. Bah. Humbug. And more Monday news!

Monday, February 15th, 2016 by Joe Kristan

20160215-1Today is President’s Day. I don’t care to honor presidents, as a class. They range from remarkable to vile, and they are in the end, just men with a job and great responsibility, often exercised badly.

It seems as good a day as any to ponder a well-buried scandal of the current presidency, the Tea Party scandal. It came to light with a staged admission by Lois Lerner that Tea Party groups had been singled out for special treatment” by the IRS. The admission was intended to get in front of an Inspector General report exposing the partisan mistreatment.

Peter Reilly has followed it closely, from a viewpoint more sympathetic to the IRS than mine. He recently mused, in a post on Day 1000 of the scandal:

The narrative that seems most plausible to me is Lois Lerner as the Agent From Hell.  AFH is my term for a certain type of IRS agent that I have thankfully only encountered a couple of times in my career.  AFH is not that technically astute, but AFH is dogged.  And AFH is certain that your client is up to no good.  AFH just hasn’t quite figured out what that no good is.  That was Lois Lerner and the Tea Party applications, only she had to do her work through minions.  Lois Lerner was passionate about the dark money issue and nobody else seemed to care. So she tortured her line agents to get them to torture bewildered applicants who were already pumped up on conspiracy theories. A perfect storm of bureaucratic bumbling coming across as brilliantly subtle conspiracy.

Toby Miles, IRS.

Toby Miles, IRS.

It was never realistic to think the scandal would bring down the administration, considering how carefully the media cheerleaders avoided the subject. But the lack of presidential involvement only leads to a more disturbing conclusion, one I discussed way back when the scandal was only in single digits:

I doubt the White House left fingerprints on IRS efforts to harass political opponents (though it didn’t lift a finger to stop it).   That leads to an even more depressing possibility: that the IRS went out its way to beat up on the President’s opponents on its own.  Nobody blew the whistle.  That means IRS management is so corrupt and political that it would go after the administration’s political opponents with only a wink and a nudge.  And anybody who doesn’t think this was politically-motivated is kidding themselves.

James Taranto puts it well:

And the IRS scandal was a subversion of democracy on a massive scale. The most fearsome and coercive arm of the administrative state embarked on a systematic effort to suppress citizen dissent against the party in power. Thomas Friedman is famous for musing that he wishes America could  be China for a day. It turns out we’ve been China for a while.

The self-weaponization of the bureaucracy against its political opponents is hugely depressing. The government workforce is overwhelmingly on the side of the political party that favors an ever-larger state. There are plenty of Lois Lerners in the IRS and throughout the Leviathan. The Tea Party scandal, and the complete lack of accountability for its perpetrators, gives no reason to hope those who don’t share that worldview can expect a fair shake. That’s especially true when the sitting president shows no interest in discouraging such behavior.

 

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Arnold Kling, David Brooks Sends a Valentine. “Brooks claims that the Obama Administration was scandal-free. I think it was more of a case that the mainstream press had his back. Could George Bush have survived the IRS scandal?”

David HendersonIs David Brooks Right about Obama? (Econlog):

But that’s not the worst. Among the worst is his administration’s use of the Internal Revenue Service to go after Tea Party groups. After claiming in May 2013 that any IRS targeting of political groups, if true, was outrageous and that he would hold the relevant people accountable, he has not. Lois Lerner has not been charged. That’s a scandal. It’s true that the scandal did not swallow years from Obama. Is the relevant criterion for a scandal whether it uses up a president’s years or whether the president’s employees use their discretionary power to go after political scandals? If the former, then a president can avoid a scandal by being evasive and shifting the topic, as Obama has done. That’s not integrity, by the way.

And it was true. Whether you believe the IRS was told to do it, or whether you believe the bureaucracy took it on itself to pursue ideological enemies, it was a dangerous ideological abuse of the tax agency that is going unpunished.

TaxProf, The IRS Scandal, Day 1010Day 1011Day 1012. Don’t recall major network coverage of the scandal? Day 1011 says that it’s not because you weren’t paying attention.

 

William Perez, Understanding Form W-2, the Annual Wage and Tax statement. “An overview of common problems with Form W-2, Wage and Tax Statement, plus a description of various items, codes and amounts shown on Form W-2.”

Annette Nellen, Video – What’s New for 2016 Filing Season

Jason Dinesen, When Are Purchases Made With a Credit Card Deductible?

Kay Bell, ‘Pharma bro’ Martin Shkreli facing $4.6 million tax lien

Jim Maule, Relying on Incorrect IRS Advice Spares Taxpayer Penalty. “The question of how to deal with incorrect advice from IRS employees has befuddled the tax practice community for decades.”

Robert Wood, Atkins Doctor Tax Evasion Conviction Upheld (How Not To Deal With IRS). Sometimes bad examples are the most useful ones.

Russ Fox, North Carolina Added to Bad States for Gamblers. “There’s no longer a deduction for gambling losses, so an amateur gambler residing in North Carolina who has $100,000 of wins and $100,000 of losses owes tax on the $100,000 of wins.”

TaxGrrrl, On Valentine’s Day: Getting A Tax Break After The Big Break-Up. “A Sarasota area Goodwill has your answer: make yourself feel better by donating your ex’s stuff to charity.” Well, compared to leaving it on the curb for the garbage man, it has its attractions.

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Tyler Cowen, Do higher marginal tax rates reduce income mobility? Marginal Revolution). “The idea that taxes matter is making a comeback in economics, though I am not sure you would get that impression from most of the economics blogosphere.”

Joseph Henchman, Justice Scalia’s Legacy and What Happens Next (Tax Policy Blog).

Don Boudreaux, Evidence that Donald Trump Is As Ignorant of Economics As Is Bernie Sanders (Cafe Hayek). File under “longest books ever written.”

Scott Greenberg, Checking Bernie Sanders’s Math (Tax Policy Blog). “However, under the Sanders tax plan, households in the middle of the economy would also be subject to two new indirect taxes: a 6.2 percent payroll tax paid by employers (for healthcare) and a 0.2 percent payroll tax paid by employers (for family leave). Virtually all economists agree that, even though payroll taxes are remitted to the government by employers, the burden of the payroll tax is born entirely by wage earners.”

 

News from the Profession. The ‘Everyday Jeans’ Policy Backlash Has Begun (Caleb Newquist, Going Concern).

 

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Tax Roundup, 2/10/16: Tax Court rules out super-duper bureaucrat deduction. And: Don’t rob the preparer!

Wednesday, February 10th, 2016 by Joe Kristan

20120801-2You are fined $50 court costs. My accountant prefers it that way.  A good lawyer can make you seriously consider a position that seems absurd at first glance. An Arizona judge whose case showed up in Tax Court yesterday must be a good lawyer.

The case is based on the difference between the tax treatment of business expenses and employee expenses. Business expenses are normally fully deductible. In contrast, expenses incurred by an employee, and not reimbursed by the employer, are only deductible as itemized deductions, and then only to the extent they — when added to other “miscellaneous” deductions — exceed 2% of adjusted gross income. Worse, even if you have enough employee expenses to show up on Schedule A, they are non-deductible in computing alternative minimum tax. That often makes them useless.

Arizona state judge Michael Jones had a clever accountant who saw a potential way around this problem. According to the Tax Court, Judge Jones incurred some out-of-pocket expenses to run his chambers when state budget cuts began to pinch. His tax preparer, a CPA, said that Section 62(a)(2)(C) made these “above the line” business expenses:

(C)Certain expenses of officials

The deductions allowed by section 162 which consist of expenses paid or incurred with respect to services performed by an official as an employee of a State or a political subdivision thereof in a position compensated in whole or in part on a fee basis.

So how did that affect Judge Jones? From Tax Court Judge Holmes (my emphasis, citations omitted):

Maricopa County Superior Court is funded in part by the collection of fees. Individuals must pay the superior court clerk fees for various case filings, petitions, writs, the filing of any documents, and the issuance of any licenses or certificates. The county does not, however, receive fees paid for wedding ceremonies — judges are allowed to collect those directly (although Judge Jones himself did not charge for weddings during the years at issue).

Judge Jones argues that “in a position compensated in whole or in part on a fee basis” means something like “a position funded in whole or in part by fees paid by members of the public for services rendered by judges.” Neither the Code nor the regulations define what “fee basis” means, and the case law is similarly stubborn in its silence.

Judge Holmes ponders the arguments and reaches his decision:

We also have to conclude that the Commissioner’s position is the more reasonable one. An enormous number of government agencies, courts, departments, and boards receive fee income. If Judge Jones’s construction of section 62(a)(2)(C) were correct, all the positions in all these government bodies would be “position[s] compensated in whole or in part on a fee basis.” This would create a caste of employees — those employed as government “officials” — who would be exempt from the rule Congress chose to enact that limits the deductibility of unreimbursed employee expenses. Maybe Congress could do that, but it didn’t do so plainly. Business expenses are also usually thought deductible because they are an ordinary and necessary requirement for producing income. But Judge Jones’s reading of section 62 would uncouple the deductibility of an expense from the income it produces — once a position was funded in part by fees, any employee holding that position would be entitled to unlimited deduction of his unreimbursed business expenses regardless of whether those expenses had anything to do with those fees.

I think Judge Holmes comes to the right conclusion dealing with this obscure provision. If he concluded differently, every public official would be running to their preparers to amend all the open years. Though when it comes to a privileged “caste” of public employees, we’re further down that road than we should be already.

The moral? It’s important to handle business expenses properly. Many taxpayers who own S corporations, for example, pay some business expenses themselves without being reimbursed by the S corporation. Such expenses become “employee” expenses and are routinely lost. By submitting the costs to the employer — their own S corporation — for reimbursement, they become corporation expenses and fully deductible.

Cite: Jones, 146 T.C. No. 3

 

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Accounting Today, Obama Budget Includes Tax Increases and Tax Preparer Regulation. Of course it does.

We need IRS employees to oversee preparers to prevent fraud. IRS Employee Pleads Guilty to $1 Million ID Theft Tax Fraud Scheme (Department of Justice).

Kay Bell, Obama’s final budget is full of big, but unlikely to be fulfilled, tax and spending ideas. It will go over well as his prior budgets.

 

Paul Neiffer, We Knew It Was Coming!:

In doing various tax classes over the last few years, I almost always stated that it would only be a matter of time before the President would ask for this net investment income tax to be applied to S corporation and partnership income whether passive or material.  In the new budget proposal issued by the President, that time has come.

His budget proposes that all income of S corporations and partnerships be subject to the net investment income tax of 3.8%.  This would include any gains from selling any assets inside of these entities or selling the stock or partnership interest.  This will affect farmers who have large gains in the future.

Somehow I don’t think the momentum is there to expand Obamacare taxes.

 

Russ Fox, Can a Resident of a Non-Tax Treaty Country (With Respect to Gambling) Get His Withheld Funds Back? “Canadians are allowed to file a Form 1040NR and claim gambling losses up to the amount of wins, and get a refund. New Zealanders are not.”

Peter Reilly, Is Tax Foundation Unfair To Bernie Sanders? Only if it’s unfair to focus on the destruction that would result from his confiscatory taxes, rather than the magical results he promises when he gives you some of your money back through those wonderful and always efficient government programs.

Lany Villalobos, Patrick Tohomas, The Struggle to Obtain Individual Taxpayer Identification Numbers (Procedurally Taxing). The government is doing its best to increase tax burdens on offshore investors, while at the same time making it hard for them to even start complying.

TaxGrrrl, Ask The Taxgirl: The Child Tax Credit

Robert Wood, New Excuse: ‘Fear Of IRS Audit Made Me Cheat On My Taxes’ Huh?

 

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TaxProf, The IRS Scandal, Day 1007. After five years, one of the prominent 501(c)(4) applications slow-walked through the IRS process is finally approved. Nope, no politics here.

Tax Policy Blog, 2015 Outstanding Achievement in State Tax Reform Awards. None awarded to Iowans, unsurprisingly.

Ajay Gupta, Hillary Clinton’s Wall on the Border (Tax Analysts Blog):

Turns out the inevitable Democratic nominee, Hillary Clinton, would also build a great, great wall. Unlike Trump’s wall, hers would not deter foreign individuals lacking proper documentation from coming into the country. Instead, it would dissuade U.S. corporations stuck with domestic charters from leaving. And she would have U.S. investors and workers pay for that wall.

Something about grasping politicians loves a wall.

 

Career Corner. Which Popular Accounting Hashtag Should You Use? An Explainer (Caleb Newquist, Going Concern).

 

Jim Maule, Stupid Criminals, Tax Version. “According to several reports, including this one, a woman and her son walked into a Liberty Tax Services office in Toledo, Ohio, pointed what appeared to be a gun over which a towel was draped, demanded money, and made off with $280… It turned out that the “gun” was a curling iron. And it also turned out that the staff recognized the two as customers who had used Liberty’s services a few days earlier.”

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