Sometimes a big refund isn’t a good thing. A Shellsburg, Iowa man went too far to get his clients big refunds. The AP reports that Keith Rath was sentenced last week to 21 months after pleading guilty one count of an 8-count indictment. He was charged with fabricating business income on 1040s.
While it may seem odd that the IRS would have a problem with taxpayers reporting too much income, the Earned Income Tax Credit is the motivation. If you have around $10,000 of businss or wage income, you can maximize this refundable credit, generating a nice check from the IRS.
The report says the clients were anaware of the fraud. It seems like you would notice a business on your return that doesn’t exist, but many taxpayers don’t even look, especially if they like the refund being reported. The taxpayer problably isn’t pleased to have to give that money back.
It is estimated that about 25% of earned income tax credit claims are improper. That apparently is just fine with the Governor and the Iowa General Assembly, who doubled Iowa’s EITC last year — with a predictible effect of sending around $8 million to Iowa thieves annually, with and without the aid of shady preparers.
TaxProf, The IRS Scandal, Day 89.
Jason Dinesen, Taxpayer Identity Theft — Part 18:
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.
On August 1, 2013, the refund check from the IRS for that 2010 tax return finally arrived in Wendy’s mailbox.
Jason’s series on his client’s identity theft nightmare shows the huge cost of this out-of-control scam. While the $5 billion mailed annually to thieves is bad enough, it pales compared to the human cost to the taxpayers whose IDs are stolen — the months of frustration, the near-useless bureaucracy, and the financial losses. The IRS failure to address this, while spending resources on a useless preparer regulation scheme, are what made Douglas Shulman the Worst Commissioner Ever.
Me, When you buy business assets, no do-overs. (IowaBiz.com):
The Moral? No do-overs. You only get one shot at the purchase price allocation when you buy a business. The purchase price allocation needs to be addressed early in your negotiations. If you want to have experts come in for a cost segregation study, you should do it as part of your due diligence before the deal closes, or under agreement after the close with the seller. You can’t unilaterally change the allocation.
Robert D. Flach has his Buzz on!
Peter Reilly, Rhode Island Not Giving Historic Credit For Journal Entries. But journal entries are history, right?
William Perez, IRS Update for August 2, 2013
Yes. Is the Exclusion for Employer-Provided Healthcare Outdated? (Jeremy Scott, Tax Analysts Blog)
Martin Sullivan, Tax Reform: Will the Chairmen Offer Real Plans or Gimmicks? (Tax Analysts Blog) Bet on gimmicks.
Kyle Pomerleau, More Trouble for Small Businesses in Tax Reform Talks (Tax Policy Blog)
Today, it seems like there is more trouble for pass-through businesses coming from the Democratic Party.
According to Tax Analysts (subscription required), Charles Schumer (D-NY) is quoted as saying “I don’t think we should lower individual tax rates. I think the overwhelming majority of our caucus agrees. We think 39.6 percent is about the right rate.”
Any “reform” that doesn’t lower rates is no reform at all.
Tax Justice Blog, Sales Tax Holidays Are Silly Policy:
While one commonly cited rationale for such holidays is that they increase local consumer spending, boosting sales for local businesses, available research concludes this “boost” in sales is primarily the result of consumers shifting the timing of their already planned purchases.
Jana Luttenegger, Sales Tax Holidays in Iowa and around the US
Howard Gleckman, We Make More Than We Think (TaxVox)
Boulevard of Broken Dreams. The AICPA Has Created A Place For Young CPAs To Share Their Woes (and Dreams) (Going Concern)
Answering The Critical Question: Why we all need Dolce & Gabbana to survive the tax evasion drama (Handbag.com)