We should all face such poverty. A Mississippi orthopedic surgeon has been convicted of tax evasion through an unbelievably hokey dodge. From a Department of Justice press release:
The evidence at trial showed that Dr. Jackson claimed he had taken a vow of poverty in 2003 with the “Church of Compassionate Service,” an entity located in Utah, claiming that he was therefore exempt from paying any income tax. The evidence proved that he made substantial income practicing medicine but had not filed a tax return or paid any income tax since 2003. It also showed that he used nominee accounts and other devices to conceal his income from the IRS through the “church,” but that in fact 90% of the income was returned to him.
The indictment said Dr. Jackson had taxable income of $823,000 in 2009, but failed to file a return. He may have had a disturbing lack of faith in his faith-based tax planning, though, as he also was accused of hiding assets by using fake invoices to inflate expenses and by putting his vehicles in “Ministry Vehicle #1 Holdings Trust.”
While the failure of this scheme isn’t remarkable, it is remarkable that somebody smart enough to complete medical school and establish an evidently successful surgical practice would attempt such a ridiculous tax dodge. After his likely prison term and the probable collection of back taxes and 75% civil fraud penalties, plus interest, the doctor may finally have a chance to fulfill his vow of poverty.
More from Robert Wood: Invent A Church, Skip Taxes, Enrage IRS, Go To Jail
Robert D. Flach has published his monthly The Tax Professional newsletter for October. Robert is always entertaining, always intelligent, even if I don’t think he’s always right.
His lead October item is “Obamacare – Good Concept but Bad Legislation:”
The basic concept of Obamacare is a good and valid one – attempting universal health insurance coverage for all Americans without having to resort to UK-like “socialized medicine”.
He says this “good concept” was just badly executed:
However, for solely political reasons, the Democratic Party wanted a victory for President Obama early in his first term and rushed through poorly conceived legislation that turned out to be a total mess, instead of allowing for sufficient time to properly think through the correct and efficient application of the concept.
Nothing to disagree with in this sentence, but Robert misses the main point. His flaw is his assumption that it is even possible for any Congress to enact well-conceived legislation to restructure 1/6 of the economy. While I grant that this legislation is extraordinarily bad, there is no set of 535 humans born wise enough, and with enough information, to design a top-down system for 300 million people with 300 million different needs. That’s why I can’t agree that this is a “good concept” to begin with.
It would have been far wiser to examine the barriers that the government itself has put in place to affordable health insurance. Obvious problems are the government-imposed restrictions on interstate sales of health insurance and the restriction of tax benefits for health coverage to employer plans. Remove the barriers to developing and marketing insurance, then leave it to consenting adults to decide whether to buy insurance, and to determine what policies they need and are willing to pay for. But because reforming these things would reduce govenment power, not expand it, these fixes don’t have much support among grasping politicians and bureaucrats.
Robert also gives an excellent example of a huge, whimsical inequity in how ACA works. No doubt the upcoming tax season will teach practitioners everywhere what a “fess,” as Robert would say, we now have.
I will address some other topics in Robert’s October newsletter in future posts; he contains multitudes.
Update: Robert responds.
Russ Fox, One Good Erasure Deserves Another:
Most of the time, I wouldn’t believe that the IRS would do this. As of 18 months ago, I wouldn’t believe that the IRS would lie to Congress, would target conservative applicants for nonprofit status, and that the hard drive of any computer (or other electronic device) touched by Lois Lerner would be magically erased.
It will take years, and a much better Commissioner, to repair the damage the IRS has done to its own reputation.
TaxGrrrl, Caroline Wozniacki Forgets Her Paycheck, Can’t Skip Out On Taxes. They don’t offer direct deposit for these things?
Roger McEowen, Counties Eligible for Extended Replacement Period for Livestock Sold Due to Drought (ISU-CALT)
Peter Reilly, Seventh Circuit Allows Do-over On Tax Court Stipulations For Deceived Taxpayers. IRS doesn’t get to benefit from practitioner’s deceit.
Michael Desmond, Is There a Future Role for Circular 230 in the Internal Revenue Service’s Efforts to Improve Tax Compliance? (Tax Procedure Blog). A good coverage of the flaws in Circular 230 as a regulation tool, but I can’t let this statement go:
The politics of that question extend beyond this posting, but they will have to be addressed if there is to be any comprehensive response, legislative or otherwise, to Loving and the largely unchallenged proposition that paid return preparers should be subject to broader oversight than current law appears to permit.
Don’t take that “largely unchallenged” thing for granted. I challenge it, as do many practitioners. I am unwilling to trust an organization that has shown such bad faith at the highest level to control the livelihood of those of us who have to deal with them.
Joseph Thorndike, Let’s Stop Talking About Tax Reform (Tax Analysts Blog) “Outside wonky policy circles, there is simply no appetite for the real work — and real pain — of genuine tax reform.”
TaxProf, The IRS Scandal, Day 511, Did the IRS leak the Koch Brothers’ returns to the White House? TIGTA ordered to disclose whether this is being investigated.
David Brunori, A Very Good Idea to Curb Incentive Abuse (Tax Analysts Blog). It’s a proposal to ban commissions for helping seek a tax credit. I think that’s inconsistent with the logic of corporate welfare — supposedly you want to spread this wonderful stuff like candy, if you think it works, and commission-collecting middlemen help. It would be much better to eliminate their product, rather than going after their commissions for selling it.
Cara Griffith, Managing the Tax Consequences of Equity Compensation Awards (Tax Analysts Blog) “Although states have not historically been aggressive in going after nonresident individuals with equity-based compensation awards, that may change.”
Joshua D. McCaherty, Lyman Stone, A Year After $9 Billion Incentive, Boeing Employment in Washington to be Reduced (Tax Policy Blog). Thanks, chumps!