Posts Tagged ‘Roger McEowen’

Tax Roundup, 3/26/15: Not every project is an “activity,” and why that’s a good thing. And: starting Iowa’s tax law fresh.

Thursday, March 26th, 2015 by Joe Kristan

What’s an activity? The tax law’s “passive loss” rules limit business losses when a taxpayer fails to “materially participate” in an “activity.” Whether an “activity” is “passive” is mostly 20150326-2based on the amount of time spent in the activity by the taxpayer. That can raise a tricky question: just what is an “activity?”

Many businesses do multiple things. Take a CPA firm that does tax and auditing. If those feckless auditors lose money, is that a separate “activity” from the hard-working tax side? Or consider a convenience store owner with two locations; is each a separate activity, or are they one big activity?

The Tax Court addressed this problem yesterday in a case involving a South Florida developer. Greatly simplifying a complex story of real estate backstabbing and inter-family rivalry, the problem was whether an S corporation was the same “activity” as a partnership with the same owners set up for s specific development project. If so, family patriarch Mr. Lamas could cross the basic 500-hour threshold for participation in the combined activity, making his losses deductible.

Judge Buch explains the IRS regulation (1.469-4(c)) governing this issue:

This regulation sets forth five factors that are “given the greatest weight in determining whether activities constitute an appropriate economic unit for the measurement of gain or loss for purposes of section 469″:

(i) Similarities and differences in types of trades or businesses;

(ii) The extent of common control;

(iii) The extent of common ownership;

(iv) Geographical location; and

(v) Interdependencies between or among the activities (for example, the extent to which the activities purchase or sell goods between or among themselves, involve products or services that are normally provided together, have the same customers, have the same employees, or are accounted for with a single set of books and records).

This regulation further instructs that taxpayers can “use any reasonable method of applying the relevant facts and circumstances” to group activities, and that not all of the five factors are “necessary for a taxpayer to treat more than more activity as a single activity”.

Equality in action in the Soviet Union on the Belomor Canal

The judge said that Shoma (the S corporation) and Greens (the partnership) met these requirements, considering they had the same control and both were in the same general business. Also:

Finally, Shoma and Greens were interdependent. Greens operated out of Shoma offices, used Shoma employees, and consolidated its financial reporting with Shoma’s. Greens was formed by Shoma as a condominium conversion project. The shareholders intended that Greens be dissolved after the project was completed and the capital returned to its shareholders.

Because Shoma and Greens meet these five factors, we find that they are an appropriate economic unit and should be grouped as a single activity.

The taxpayer was able to satisfy the court through witness testimony and phone records that he met the 500-hour requirement.

This case is good news for developers, as this structure is common in that business: a permanent S corporation sets up new LLCs for each development project. This case correctly concludes that they are all part of the same development business.

Cite: Lamas, T.C. Memo 2015-59.

 

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

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

Me, What an Iowa income tax might look like with a fresh start. My new post at IowaBiz.com, the Des Moines Business Record Business Professionals’ Blog, on what Iowa’s tax system might look like if we could start over. A taste:

A system designed from scratch would apply the ultimate simplification to Iowa’s corporation income tax: it wouldn’t have one. Iowa’s corporation income tax is rated the very worst, with extreme complexity and the highest rate of any state. 
 
Eliminating the corporation income tax would eliminate the justification for almost all of the various state incentive tax credits, all of which violate the principles of neutrality and simplicity in the first place. For its astronomical rates and complexity, it generates a paltry portion of the state’s revenue, typically 4-7 percent of state receipts.
 
For S corporations, a from-the-ground-up tax reform might tax Iowa resident shareholders only on the greater of distributions of S corporation income, or interest, dividends, and other investment income earned by the S corporations. The investment income provision would prevent the use of an S corporation as a tax-deferred investment. The effect would be to put S corporations on about the same footing as C corporations.

I have little hope in the legislature actually doing something sensible, but we have to start somewhere. I’d love to hear any thoughts readers may have.

 

 

Roger McEowen addresses the Tax Consequences When Debt is Discharged (ISU-CALT): “There are several relief provisions that a debtor may be able to use to avoid the general rule that discharge of indebtedness amounts are income, but a big one for farmers is the rule for ‘qualified farm indebtedness.'”

Russ Fox, A Break in my Hiatus: Poker Chips and Tax Evasion. Russ lifts his head from his tax returns to tell of the tax problems of a poker chip maker that he has personal experience with. “A helpful hint to anyone wanting to emulate Mr. Kendall: Just pay employees in the normal way, on the books, and send the withholding where it belongs.”

TaxGrrrl, Taxes From A To Z (2015): N Is For Nonrefundable Tax Credits

Robert Wood, Tax Fraud Draws 6 1/2 Year Prison Term Despite Alzheimer’s. Specifically, a dubious claim of Alzheimer’s.

Peter Reilly, Did Andie MacDowell’s Mountain Hideaway Require Tax Incentives? To listen to some people, you’d believe nothing good ever happened until tax credits were invented.

 

20150326-3

 

Jason Dinesen, Financing a Small Business, Part 5 of 5: Know When to Keep Quiet With the Banker. “Here are a couple of real-world examples I’ve seen where business owners got hung up with the bank because the owner wouldn’t stop talking.”

This has lessons for IRS exams, too.

Kay Bell, Obamacare, bitcoin add twists to 2014 tax filing checklist

Annette Nellen, Another Affordable Care Act Oddity. “Perhaps the problem is more tied to the “cliff” in the PTC that causes someone to completely lose the subsidy once their income crosses the 400% of the FPL (more on that here).”

William Perez, How Much Can You Deduct by Contributing to a Traditional IRA?

 

Alan Cole, Richard Borean, Tom VanAntwerpWhich Places Benefit Most from State and Local Tax Deductions? (Tax Policy Blog):

20150326-1

 

The short answer? Places with high state tax rates and high-income earners. Note the purple spot right in the middle of Iowa.

 

TaxProf, The IRS Scandal, Day 686

Renu Zaretsky, Sense and Sensibilities. Today’s TaxVox headline roundup covers the House GOP budget, a Texas tax cut, and tax-delinquent federal employees.

 

Richard Phillips, How Presidential Candidate Ted Cruz Would Radically Increase Taxes on Everyone But the Rich (Tax Justice Blog). A taste:

On the flat tax, Cruz has not yet spelled out a specific plan that he would like to see enacted, but it’s unlikely that any plan he proposed will be significantly better than the extremely regressive flat tax proposals that have been offered in the past.

Or, “we don’t know what he will do, but it will be terrible!”

 

Caleb Newquist, Big 4 Gunning for Big Law. To steal a cheap line: who wins if the Big 4 and Big Law fight to the death? Everybody!

Share

Tax Roundup, 3/25/15: Why the casino may not be the place to invest those millions from that Chinese guy.

Wednesday, March 25th, 2015 by Joe Kristan

In the movies, an American who is entrusted with millions from a Chinese shipping magnate, but blows it at casinos, would face unimaginably dire consequences. In real life, he faces the IRS.

20120511-2That’s the story in a weird Tax Court case decided yesterday. The shipping magnate, a Mr Cheung, had fared poorly as an investor. He met a Mr. Sun from Texas and decided that he might be better at investing. He shipped the money to a C corporation and an e-Trade account owned by Mr. Sun, under a handshake deal with fuzzy terms. Judge Paris explains:

The only part of the arrangement that both Mr. Cheung and Mr. Sun consistently agreed on was the general structure of the investment. Mr. Cheung would transfer sums of money through his shipping companies’ bank accounts to Mr. Sun, who would then invest the money in the United States. Mr. Cheung would decide how much money he wished to send, and Mr. Sun had discretion on which investments to pursue with Mr. Cheung’s money.

The remaining terms of the verbal agreement were not memorialized and are unclear. Specifically, Mr. Sun and Mr. Cheung inconsistently described the investment term, the expected return, and enforcement provisions. Mr. Sun believed the term was a minimum of 5 years and did not give a maximum period, whereas Mr. Cheung believed the term was 7 to 10 years. The expected return is also unclear; Mr. Sun believed the return on investment would be a 50-50 split of the net profit with a minimum 10% gain annually, but the return might not be paid annually. Mr. Cheung believed the return would be 10% to 15%, but was uncertain whether that return was annual or total.

Not the sort of investment arrangement Suze Orman or Dave Ramsey would embrace. Nor would they embrace some of the “investments” described in the Tax Court case.

The funds sent to Mr. Sun’s C corporation went into an “officer loan account” for Mr. Sun. And then… well, again from Judge Paris (emphasis mine):

Mr. Sun would either pay his personal expenses directly from the officer loan account or he would remove money and use it at his discretion. For example, in 2008 Minchem paid $135,874.43 for home automation, $158,517.80 for a new Mercedes Benz, and $49,598.81 for personal real estate tax. In total, Minchem’s officer loan account was debited $4,116,414.43 in 2008 and $1,811,127.65 in 2009 for expenses that Mr. Sun identified as personal during his trial testimony.

Some of the personal expenditures included gambling expenses. In 2008 $4,800,100 was transferred to casinos from the officer loan account and $2,394,550 was returned. In 2009 $1 million was transferred to casinos and $1,300,000 was returned. Thus between 2008 and 2009 Mr. Sun transferred $5,800,100 from the officer loan account to casinos and received back $3,694,550; i.e., over the two years in issue Mr. Sun lost $2,105,550 from gambling from the officer loan account.

20120801-2Judge Paris said that the funds never belonged to the C corporation because it was a mere conduit for the cash; that meant the corporation was not taxable on the amounts.

Mr. Sun didn’t get off so easy. Judge Paris said that the funds became income to Mr. Sun when he began spending them for his own purposes (citations omitted):

Whether funds have been misappropriated is a question of fact, but facts beyond “dominion and control” must be considered. More specifically, an individual misappropriates funds when money has been entrusted to the individual for the sole purpose of investing and the individual instead uses the money for personal activities.

Mr. Sun undisputedly treated as his own money held for Mr. Cheung’s benefit and specifically earmarked for investment purposes. For example, Mr. Sun used some of the funds to purchase a personal automobile and a home automation system. Perhaps the most obvious example of Mr. Sun’s misappropriation of the funds is his gambling activities.

The opinion dismissed the idea that the funds were loans because there was no documentation of any sort of loan agreement or terms. The court said that the amounts weren’t gifts because no Form 3520, where U.S.  taxpayers report large foreign gifts, was filed, and because there was no evidence of an intent to make a gift.

While the Tax Court ruled that Mr. Sun misappropriated the money, it ruled that the IRS failed to prove fraud. That meant the penalties were only 25% of the roughly $4.7 million of additional tax, rather than the 75% under the civil fraud rules.

The Moral? Hard to say. Don’t squander millions of dollars entrusted to you for investment at casinos? You didn’t need the Tax Court to tell you that. Maybe it’s a handy reminder to file Form 3520 if you receive large foreign gifts, lest the IRS get the wrong idea (and lest they hit you with a $10,000 penalty for not filing it). And if you have had bad luck with your investments, maybe index funds are a better way to go than a handshake deal with some guy in Texas.

Cite: Minchem International, Inc., et. al., T.C. Memo 2015-56.

 

Kyle Pomerleau, U.S. Taxpayers Face the 6th Highest Top Marginal Capital Gains Tax Rate in the OECD (Tax Policy Blog):

20150325-1

 

The United States currently places a heavy tax burden on saving and investment with its capital gains tax. The U.S.’s top marginal tax rate on capital gains, combined with state rates, far exceeds the average rates faced throughout the industrialized world. Increasing taxes on capital income, as suggested in the president’s recent budget proposal, would further the bias against saving, leading to lower levels of investment and slower economic growth. Lowering taxes on capital gains would have the reverse effect, increasing investment and leading to greater economic growth.

But, but, the rich!

 

IMG_1388William Perez covers Various Types of Individual Retirement Accounts.

Paul Neiffer, Tax Court Allows $11 Million Horse Loss to Stand. “Now, though this is a victory for the taxpayer in Tax Court, they are still out over $11 million in losses (or more).  I am not sure if it really is an overall win for the taxpayers.”

TaxGrrrl, Taxes From A To Z (2015): M Is For Municipal Bonds.

Jason Dinesen discusses Recordkeeping Considerations for a Startup Business.

Roger McEowen, USDA Releases Proposed Definition of “Actively Engaged in Farming” That Would Have Little Practical Application. Sounds useful.

Kay Bell, $42 million Montana mansion owner loses property tax fight. Looks like a nice place.

Jim Maule, When Social Security Benefits Aren’t Social Security Benefits: When They Meet Tax. “By reducing social security benefits on account of the state retirement system benefit payments, the Congress causes the portion of the taxpayer’s overall retirement receipts that is treated as taxable pension payments to increase, which in turn not only increases gross income on its own account but generates gross income from a portion of the social security benefits.”

Joni Larson, Proposal to Amend Section 7453 to Provide that the Tax Court Apply the Federal Rules of Evidence (Procedurally Taxing)

 

Tony Nitti, Ted Cruz To Run For President: Why His Plan For A Flat Tax May Doom His Candidacy:

Whether a move to a much more regressive system than the one currently in place is ultimately in the best interest of the economy and country is irrelevant; the Democrats will seize on the shift in the tax burden and continue to paint Republican candidates as seeking only to placate the rich.

I think Hillary Clinton, or whoever the nominee is, will do that to any Republican opponent, regardless of any actual policy positions. The question is whether they will be able to more successfully deal with the issue than Mr. Romney.

Robert Wood, Taxing Stephen King, Taylor Swift And Phil Mickelson

 

IMG_1431b

 

Renu Zaretsky, Tax Struggles and Tax Sneaks. Today’s TaxVox headline roundup has stories about how Orrin Hatch wants tax reform and John Koskinen wants more money.

David Brunori, Louisiana Tax Reform: Some Smart Guys Worth Listening To (Tax Analysts Blog)

TaxProf, The IRS Scandal, Day 685.  Today’s post features Media Matters, living proof that the IRS concern over political activity was rather selective.

 

Career Corner. Confirmed: Golf More Difficult Than CPA Exam (Caleb Newquist, Going Concern). But almost as much fun!

 

Share

Tax Roundup, 3/23/15: ACA is five years old today. How’s that working out?

Monday, March 23rd, 2015 by Joe Kristan

Productivity wins! All three Iowa teams are out of the men’s NCAA basketball tournament. Back to those 1040s, fans!

 

obamasignsaca

President Obama signs the Affordable Care Act. Image via wikimedia.org

Five years. The Affordable Care Act, or Obamacare, was signed into law five years ago today. Thanks to many delays — some part of the original law, others done in spite of the law to get past the elections — taxpayers and preparers are just beginning to cope with key portions of the law.

This is the first year for returns with the individual mandate — officially, and creepily, the “Individual Shared Responsibility Provision.” While many taxpayers thought this would only amount to $95, taxpayers hit with the penalty are learning that their refunds will get dinged for up to 1% of their AGI over a relatively low threshold.

This is also the first year that taxpayers have to true up overpayments of the advance premium tax credit.  Many taxpayers who bought policies on the ACA exchanges had their monthly premiums reduced based on their estimates of 2014 earnings. This subsidy is actually a tax credit, and it has to be reconciled at year end with the actual earnings.  Taxpayers with earnings in excess of what they estimated are now learning from their preparers that they need to write checks.

20121120-2The premium tax credit is horribly designed, with a stepped, rather than gradual, phaseout. One additional dollar in income can result in a loss of thousands of dollars in premium tax credits, which then have to be repaid with the tax return. H&R Block reports that most taxpayers who claimed the credit have to repay an average of $530. The IRS has tried to patch over some of the unpleasantness, unilaterally waiving penalties this year for taxpayers who have to repay the credits.

Here in Iowa, smaller employers who want to offer ACA-approved health insurance can’t, in the wake of the failure of the heavily-subsidized CoOportunity health insurance carrier. The IRS will still allow Iowa businesses to claim the convoluted credit for small employers for 2015. It required carriers who had signed up with CoOportunity to scramble to find new coverage, and it required many families who had already reached their out-of-pocket limits to start them over with a new carrier.

 

Looming over all this is the Supreme Court’s impending decision in King v. Burwell. The IRS decided to allow the premium tax credit in the 34 states using federal exchanges, in spite of statutory language limiting the credits to exchanges created “by the states.” If the court goes with the way the law is drafted, the premium tax credit will be gone for those 34 states, including Iowa. Employers in those states will be suddenly exempt from the “employer mandate” that begins to take effect in 2015. Millions of taxpayers will also be free of the individual mandate penalty because their insurance will no longer be “affordable.”

If you want to celebrate, head over to Insureblog, where they are always updating the latest developments and unintended consequences of the ACA.

 

 

20150312-1William Perez, Did You Pay Interest on Student Loans? It May be Tax Deductible

TaxGrrrl, Understanding Your Forms: 1098-T, Tuition Statement

Roger McEowen, Are Payments Made to Settle Patent Violations Deductible? (ISU-CALT)

Kay Bell, Tax returns on hold while IRS asks ‘Who Are You?’

Peter Reilly, Ninth Circuit Rules Against War Tax Resister

Jim Maule, Tax Credit for Purchasing a Residence Requires a Purchase. “Nothing in the opinion explains why the taxpayer thought she had purchased the residence. Nor does it explain why the taxpayer, if not thinking that she had purchased the residence, would claim that she did.”

Peter Hardy, Carolyn Kendall, Between the National Taxpayer Advocate and the Courts: Steering a Middle Course to Define “Willfulness” in Civil Offshore Account Enforcement Cases Part 1 (Procedurally Taxing). “The OVD programs have netted many people who may have inadvertently failed to file FBARs, and who are not wealthy people with substantial accounts.”

In other words, shooting jaywalkers while giving international money launderers a good deal.

 

Robert Goulder, When All Else Fails, Blame a Tax Pro (Tax Analysts Blog) “OK, the tax code is a disgrace. I get it. But a member of Congress is blaming tax professionals? Really?”

Congress is sort of like the guy who leaves his food plate on the floor, falls asleep, and then blames the dog for eating it.

 

IMG_1429a

 

Joseph Henchman, 10 Remaining States Provide Tax Filing Guidance to Same-Sex Married Taxpayers. “After the IRS decision to allow gay and lesbian married couples to file joint federal tax returns, we noted that a number of states would have to provide guidance because they require two contradictory things: (1) if you file a joint federal return, you must file a joint state return, and (2) same-sex married couples cannot file jointly.”

Renu Zaretsky, Budget Battles and Filing Follies: The Sagas Continue. Today’s TaxVox headline roundup tells of abundant ACA tax filing headaches and more tax nonsense from the only avowedly-socialist senator, Bernie Sanders.

TaxProf, The IRS Scandal, Day 683Day 682Day 681. “Commissioner John Koskinen, testifying before the House Appropriations subcommittee this week, admitted that nearly a dozen grassroots conservative groups seeking tax-exempt status are still awaiting determination.”

Robert Wood, Report Says Former IRS Employees–Think Lois Lerner–Can Still Peruse Your Tax Returns. Well, that’s reassuring.

 

Career Corner. Going Concern March Madness: More #BusySeasonProblems (Caleb Newquist, Going Concern). Brackets asking important work life questions like Which is the bigger busy season problem? Working Saturdays (#1 seed), or Colleagues who heat up smelly leftovers (16 seed).”

I’ll take the underdog.

 

Share

Tax Roundup, 3/20/15: Tax Foundation looks at Iowa Alt Max Tax proposal.

Friday, March 20th, 2015 by Joe Kristan

IMG_1284More on the Iowa Alternative Maximum Tax Proposal. The Tax Foundation’s Jared Walczak discusses HSB 215 in Iowa Considers Alternative Maximum Tax:

The basic idea is that each year, taxpayers get to choose between (1) paying under the current graduated income tax structure, claiming any credits, deductions, or exemptions for which they are eligible; or (2) paying a flat 5 percent rate on all taxable income while foregoing most income subtractions.

Those making the election for a flat rate would still be able to subtract the standard deduction ($6,235 for an individual), plus interest and dividends from federal securities, and federal pension income, but would forego other subtractions. In exchange, they could pay a flat 5 percent rate.

Jared comes to conclusions much like I did when I looked at the 2013 version of this proposal:

Iowa is one of a small number of states that allow a deduction for federal income taxes paid, which can certainly be significant. However, I crunched the numbers on a variety of scenarios, and conservatively estimate that taxpayers with more than $40,000 in taxable income would almost always be better off paying the alternative tax—unless, again, they fall into tax-advantaged categories as farmers, low-income families with children, and the like.

It is not, however, a sure thing. Some high income taxpayers might fare better under the traditional rate structure if they combine that federal deductibility with, say, sizable deductions for charitable contributions. And some low middle-income families might qualify for enough assistance through the tax code to make the standard approach worth their while. This adds complexity to the system, as taxpayers would want to calculate their tax burden both ways.

Jared notes that the proposal would be a revenue loser to the state, adding to its political problems. He also provides an example of another state that has tried a similar setup:

Alternative maximum taxes are rare but not unknown. Rhode Island adopted an alternative flat income tax structure from 2006 – 2011 which culminated in lower overall rates and the elimination of the state’s top brackets. That bill included phased-in reductions in the flat rate, whereas the legislation pending in Iowa sets the rate at 5.0 percent in perpetuity, but like the Rhode Island bill, this Iowa proposal draws upon elements of good tax policy. Ideally, though, Iowa would look at ways to reduce its high income tax burden without making taxpayers calculate their tax burden twice.

While I have not heard anyone in the legislature say so, I believe this is an attempt to provide badly-needed individual tax reform to Iowa withoutIf Iowa's income tax were a car, it would look like this. offending Iowans for Tax Relief.  The self-proclaimed “Taxpayers’ Watchdog” is known as a powerful force in the Iowa GOP, and has been known to set up primary challenges to those falling into its disfavor (though one observer says its influence has waned). ITR is an uncompromising backer of the deduction for federal taxes on Iowa returns. It is very difficult to achieve significant rate reductions while leaving the deduction in place. By leaving the deduction on the books while making it mostly meaningless, the Alt Max Tax backers sneak reform past the watchdog.

Related Tax Update Coverage:

Iowa Alternative Maximum Tax advances to its doom.

The Iowa flat tax proposal: a good deal for middle class and up, but not for lower incomes.

 

Roger McEowen, How Do I Handle Unharvested Crops At Death? (ISU-CALT). “When an individual dies during the growing season, the tax treatment of the crop is tied to the status of the decedent at the time of death.”

William Perez, Did You Pay Interest on Student Loans? It May be Tax Deductible

TaxGrrrl, Understanding Your Forms: 1098-E, Student Loan Interest Statement

Robert Wood, Which Legal Fees Can You Deduct On Your Taxes?

Kay Bell, IRS welcomes tax tip-off time, aka March Madness betting

Jason Dinesen, Glossary: Earned Income Credit

Peter Reilly, Tax Court Rules That Being Accommodation Party In Tax Shelter Is Hard Work. Apparently signing papers can be taxing. I appreciate this:

The Harvard degrees and successful architecture practice were negatives when it came to getting out of the accuracy penalty. Also Mr. Chai had not provided all the correspondence to his tax adviser.  Of late I’ve been thinking that the IRS is too quick to propose the accuracy penalty, a sentiment Joe Kristan shares,  I’ll bet Joe wouldn’t object to this one.  It is actually pretty mild.

Not every wrong tax penalty is negligent or willful, but some certainly are.

 

IMG_1216

 

Keith Fogg, From Lindbergh to Nixon to Stegman – Fixing Information Flow in Identity Theft Cases (Procedually Taxing):

Recently, the United States District Court for the District of Kansas in the case of Kathleen Stegman ruled that the IRS could keep from the taxpayer the return filed by someone using her identifying information.  The sad part here is that the administrative decision to withhold the returns from her and the Court’s decision sustaining the IRS refusal to turn over the information seems to correctly reflect the law as it stands.  The law should change and taxpayers should have the ability to access documents using their identifying information.

It seems that the IRS is very good at hiding behind taxpayer confidentiality to cover its own mistakes.

 

TaxProf, The IRS Scandal, Day 680

Annette Nellen covers the AICPA tax reform suggestions for individuals:

The suggestions address:
1. Simplified Income Tax Rate Structure;
2. Education Incentives;
3. Identity Theft and Tax Fraud;
4. Relief for Missed Elections (9100 Relief); and
5. “Kiddie Tax” Rules.

The AICPA proposal is here.

 

youn-se-thumb

 

Howard Gleckman, Trying to Square the House’s Tax Cuts and Its No-Tax-Cut Budget. “House tax writers seem to be ignoring their own party’s fiscal plan.”

Matt Gardner, House Budget Proposal Silent on Fate of Budget-Busting Tax Extenders (Tax Justice Blog).

Career Corner. The Aftermath of the Ex-PwC Employee Who Got Fired After a Dispute with Comcast Is About What You’d Expect (Caleb Newquist, Going Concern).

 

Today’s Spambox Bargain: “Canadian Nightcrawlers Shipped Direct To You. Live Guarantee.”

Canadian!

Share

Tax Roundup, 3/4/15: Big week for trusts. And: Iowa gets its own tax phone scam!

Wednesday, March 4th, 2015 by Joe Kristan

1041Friday is Day 65 of 2015. Though March 6 is just another day to most people, it has always meant something to me (happy birthday, Brother Ed!). It also means something to trustees. The tax law allows trusts to treat distributions made during the first 65 days of the year as having been made in the prior year. This allows complex trusts to control their taxable income with a distribution, because trust distributions carry trust taxable income out of the trust to beneficiary 1040s.

This has become more important since the enactment of the Obamacare 3.8% Net Investment Income Tax. This tax hits trusts with adjusted gross income in excess of $12,150 in 2014. If a trust has beneficiaries below the much-higher NIIT thresholds for individuals, it can make at least some of that tax go away with 65-day rule distributions.

This affects “complex trusts,” which are trusts that are not required to distribute their income annually and which are not otherwise taxed on 1040s. Distributions from such normally carry out ordinary income, but not capital gains. If the trust has income that is not subject to the NIIT, the distribution will be treated as carrying out some of each kind of income, so trustees have to take that into account in their NIIT planning.

Income subject to the NIIT includes interest, dividend, most capital gains, rents, and “passive” income from businesses or K-1s. Retirement plan income received by trusts is normally not subject to the NIIT. A 2014 Tax Court decision makes it easier for trusts to have non-passive income, but trust income is normally passive.

 

20120920-3An Iowacentric tax scamThe Iowa Department of Revenue warns of a scam targeted at Iowans:

The Iowa Department of Revenue has been made aware of a potential scam targeting Iowa taxpayers. The scam begins through an automated phone call, which shows on caller ID as being from 515-281-3114. That phone number is the Department’s general Taxpayer Services number; however, no automated phone calls can originate from that number.

When answering the call, the taxpayer is informed they are eligible for a refund from the Iowa Department of Revenue. The taxpayer is then asked whether the refund should be deposited into the account the Department has on file or if they’d like to donate the refund to an animal charity.

The Iowa Department of Revenue does not make these types of calls. We believe this is an attempt to steal bank account or other personal information. By fraudulently displaying the Department’s phone number on caller ID, the scammer is attempting to convince the taxpayer of the legitimacy of the call.

The Iowa Department of Revenue doesn’t phone you out of the blue. The IRS doesn’t phone you out of the blue — they barely even answer phones anymore. If you get a call from a tax agency, assume it is a scam. It is, unless you have already been in contact with the agency because of a notice you’ve received in the mail

 

Obamacare is again on the dock in the U.S. Supreme CourtThe IRS decision to allow tax credits for policies in the 37 states that did not set up ACA exchanges is up for debate. The law provides for credits only for exchanges “established by a state.”

In a less politically-sensitive context, one could expect a 9-0 or 8-a decision against the IRS. That’s what happened in Gitlitzwhere the court ruled that the IRS couldn’t regulate away a perceived misdrafting of the tax code’s S corporation basis rules that allowed a windfall to taxpayers whose S corporations had debt forgiveness income. “Because the Code’s plain text permits the taxpayers here to receive these benefits, we need not address this policy concern.” But because a decision against IRS here would invalidate key parts of Obamacare in most of the country, politics is a big part of the process.

Those arguing for the IRS interpretation say the chaos will ensue and thousands of people will dieMichael Cannon, a prime architect of the case against the IRS rule, has a more measured discussion of the consequences of a decision against the IRS rule in USA Today. Aside from upholding the rule of law, a decision against the IRS rule could have many benefits.

Related: Megan McArdle, Obamacare Will Not Kill the Supreme Court. For a roundup of posts on the topic, try King v. Burwell — The VC’s Greatest Hits, from the Volokh Conspiracy’s attorney-bloggers.

Update: From Roger McEowen, Would It Really Be That Bad If the U.S. Supreme Court Invalidated the IRS Regulation on the Premium Assistance Tax Credit?

 

IMG_4460

 

William Perez, Self-employed? SEP IRAs Help Reduce Taxes and Save for Retirement

TaxGrrrl, Taxes From A To Z (2015): A Is For Actual Expense Method

Kay Bell, Some Ohio taxpayers stumped by state’s tax ID theft quiz

Jason Dinesen, Is Chamber of Commerce Membership Worth It?. Our local group functions as an alliance of crony capitalists.

 

TaxProf, The IRS Scandal, Day 664. Today’s edition mentions my high school classmate and junior class president election opponent, Al Salvi, and his outrageous treatment at the hands of Lois Lerner when she was with the Federal Elections Commission. For the record, Lois Lerner had nothing to do with my electoral triumph.

Robert Wood, Warren Buffett To Al Sharpton, The 1% Makes 19% Of All Income, Pays 49% Of All Taxes

Alan Cole, Most Retirement Income Goes To Middle-Class Taxpayers (Tax Policy Blog).

Distribution of Pension Income-02

Clint Stretch wonders whether it is Time to Retire Income Tax Reform? (Tax Analysts Blog). “With income tax reform out of the way, we could focus the conversation on the important issue – the size and scope of government. If eventually we can agree on how much tax we need to collect, we can always ask tax reform to come out of retirement for a little consulting.”

 

Len Burman, Cutting Capital Gains Taxes is a Dead End, Not a Step on the Road to a Consumption Tax. As someone who thinks the proper capital gain rate is zero, I can’t agree.

Career Corner. Starting a CPA Pot Practice Is Your Next Opportunity (Caleb Newquist, Going Concern). “Consider a joint venture, at least.”

 

Share

Tax Roundup, 2/23/15: 800,000 blown ACA reporting forms; tens of thousands of already-filed returns are wrong. And more!

Monday, February 23rd, 2015 by Joe Kristan
The Younkers Building ruins, morning, March 29, 2014.

Be calm. All is well.

Tax Season is Saved! 800,000 Taxpayers Received Wrong Tax Info from Health Insurance Marketplace (Accounting Today):

“About 20 percent of the tax filers who had Federally-facilitated Marketplace coverage in 2014 and used tax credits to lower their premium cost —about 800,000 (< 1% of total tax filers) —will soon receive an updated Form 1095-A because the original version they were issued listed an incorrect benchmark plan premium amount,” said a blog post on the Web site of the Centers for Medicare and Medicaid Services. “Based upon preliminary estimates, we understand that approximately 90-95% of these tax filers haven’t filed their tax return yet. We are advising them to wait until the first week of March when they receive their new form or go online for correct information before filing. For those who have filed their taxes—approximately 50,000 (< 0.05% of total tax filers) —the Treasury Department will provide additional information soon.”

It says something about how screwed up this tax season is that the IRS can issue:

– A blanket waiver for the $100 per-day penalty for health insurance reimbursement arrangements;

– A small business waiver the Form 3115 filing requirement for “repair reg” accounting method changes;

– A blanket waiver for late payment penalties for advanced Obamacare tax credit clawbacks;

And still have a filing season full of “mayhem.”

Related: 

Caleb Newquist, You Won’t Mind if Your Tax Refund Is a Little Late, Will You? (Going Concern)

Ellen Steele, The Affordable Care Act Tax Filing Season: A View From the Trenches (TaxVox). “Filing is not simple, even for our volunteers who all undergo rigorous training in tax law.”

Paul Neiffer, Perhaps 800,000 or More Form 1095-A Are Wrong

 

Tax Season is saved! Ripping off your refunds: One little number fuels South Florida’s tax-fraud explosion (MiamiHerald.com

Tax Season is saved! Wow! The IRS Will Pay Out This Much in Fraudulent Tax Refunds By 2016 (Motley Fool)


20130104-1
Iowa Public Radio, Administration Grants Tax Time Reprieve For Obamacare Procrastinators:

The Obama administration said Friday it will allow a special enrollment period from March 15 to April 30 for consumers who realize while filling out their taxes that they owe a fee for not signing up for coverage last year.The special enrollment period applies to people in the 37 states covered by the federal marketplace, though some state-run exchanges are also expected to follow suit.People will have to attest that they first became aware of the tax penalty for lack of coverage when they filled out their taxes.

Megan McArdle called it. So once again they bend the ACA rules because following the law as enacted would be unpalatable. It’s as if the entire legislation is optional. Here are other made-up-on-the-fly amendments to ACA decreed by the Administration that I can think of off the top of my head:

– Waiving the $100/day penalty for employer insurance reimbursement arrangements.

– Waiving tax penalties for failure to pay the premium credit clawbacks.

– Rolling back the employer mandate penalty by a whole year — two for smaller employers.

– Allowing premium tax credits in states using federal exchanges when the statute only allows them where there is an exchange “established by a state.”

You almost might conclude that they didn’t really think things through very well when they enacted ACA.

IMG_1282

William Perez, Social Security Benefits are Partially Taxable: How Much Depends on Your Other Income.

Roger McEowen, Primer on the Income Taxation of Trusts and Estates (ISU-CALT)

Peter Reilly, You And Your Shadow Do Not A Partnership Make. “I don’t think it is news that you can’t create a partnership with yourself and a disregarded entity, but it is a point that bears repeating.”

Russ Fox, Solely a Way to Go to ClubFed. “As always, the usual warning applies: If it sounds too good to be true, it probably is. If you use a corporation sole as a vehicle to avoid taxes, you’re heading down a road that leads to ClubFed.”

Jack Townsend, Another UBS Customer Pleads

Rashia says "thanks, Commissioner!"

Someday this may seem quaint.

TaxGrrrl, What If Tax Refund Theft Isn’t Really About Refund Theft?:

In the case of Anthem, the hack was massive. Potentially 80 million customers had their data compromised, prompting the state of Connecticut to warn taxpayers that it might be to their advantage to file their taxes early.

That, security experts say, isn’t the work of a small time hack. It’s not folks working out of a van with stolen laptops or a teenage kid in a basement. It’s bigger. It’s been suggested that the hack could be related to an international crime group or perhaps even an international government. I spoke with experts in tech and security arenas – who, like Jim, wished to remain anonymous – and they’ve suggested that they would not be surprised to find that the hacks were orchestrated by the Chinese government.

Have a nice day.

David Henderson, From 2007 to 2012-13, The Income Share of Top 1% Fell (EconLog).

Andrew Lundeen, A Cut in the Corporate Tax Rate Would Provide a Significant Boost to the Economy (Tax Policy Blog). “The corporate tax rate is, in effect, a tax on corporate investment; a high corporate tax rate discourages investment, whereas a low corporate tax rate encourages investment.”

20150223-1

David Brunori ($link): 

A California company that makes cans is demanding a 20-year, 100 percent property tax exemption in return for opening a plant in Iowa. The plant will employ 120 people. The company, Silgan Containers, makes metal cans (think the containers that hold vegetables and dog food). I’m sure it’s a great company. But why should it be relieved of paying its just share of taxes? And if its demand is met, what does the Iowa government say to the companies that are already in place and employing 120 or more people? There is nothing good about this.

“Economic development” is pretty much taking money from you and your employees to lure and subsidize your competitors.

 

TaxProf, The IRS Scandal, Day 653The IRS Scandal, Day 654The IRS Scandal, Day 655

Kay Bell, All of 2015’s best picture Oscar nominees got tax break help. We would like to thank all of the chumps, er, taxpayers of the various states that help us buy these $168,000 swag bags. We wouldn’t want to do it without you.

 

 

Share

Tax Roundup, 2/9/15: New York questions its tax incentives. And: where’s the ‘no anthrax’ sign?

Monday, February 9th, 2015 by Joe Kristan

New York FlagNew York Comptroller: nobody tracks whether the state’s corporate welfare tax incentives do any good. Tax Analysts’ Jennifer DePaul reports ($link):

It’s unclear whether the $1.3 billion in incentives and credits doled out annually by New York is creating jobs, a February 5 report by State Comptroller Thomas DiNapoli concluded.

The ESDC, which administers more than 50 economic development programs, provides little public information on taxpayer-funded investments in its initiatives, the report said.

“ESDC makes no public assessment of whether its disparate programs work effectively together, whether such initiatives have succeeded or failed at creating good jobs for New Yorkers, or whether its investments are reasonable in relation to jobs created and retained,” the report said.

Naturally the politicians disagree:

On February 5 Gov. Andrew Cuomo (D) told reporters that he disagreed with the comptroller “fundamentally and on his concept of economic development” and said New York has lost its effectiveness to attract businesses over the past decade.

“We’ve come a long way in the past four years in terms of reversing that and bringing jobs back to New York,” Cuomo said. “To the extent that the comptroller thinks we should go back to the old way where we saw New York losing jobs, I couldn’t disagree more strongly.”

To politicians, the only job creation that matters is the kind that lets them hold issue press releases, hold press conferences, and cut ribbons.

For a brief shining moment in the Iowa’s Culver administration, the film tax credit fiasco made our politicians look at the Iowa’s tax credit programs. A panel of state officials issued a report finding no clear evidence that the tax credits do any good. So Iowa replaced them all and lowered individual and corporate tax rates with the savings.

Actually, no. They just continued enacting new credits. I can dream, though.

Link: The Comptroller Report.

 

dirtyThe Journal of Taxation has a summary of this year’s IRS “Dirty Dozen” tax scams. Number 1 with a bullet are phone call scams from people saying they are IRS agents. Just remember, if the caller claims to be from the IRS, he (or she) isn’t, unless you have been in touch with a specific agent by mail already.

 

Puzzling over the tangible property regulations and the 3115 requirements? The ISU Center for Agricultural Law and Taxation wants to help solve the puzzles. They have scheduled a webinar on on the regs February 18Roger McEowen and Paul Neiffer will host. Registration info available here.

 

Russ Fox celebrates 10 — the tenth anniversary of his excellent Taxable Talk. Congratulations, Russ!

William Perez, How Is Interest Income Taxed and Reported?

Annette Nellen discusses the new IRS Directory of preparers and Annual Filing Season Program (AFSP). Another useless effort by the supposedly impoverished agency.

IMG_1271Leslie Book, Preparers and Due Diligence (Procedurally Taxing)

Kay Bell, Additions to the tax law name roll of [dis]honor? We at Roth & Company would like to claim rights to the name “Roth IRA,” but alas, we had nothing to do with it.

Jason Dinesen, I Like Mowing My Lawn and Shoveling Snow; Do You Like Preparing Your Tax Return?

I see no value in hiring someone else to mow my lawn or shovel my snow.

The same principle holds true for people who choose to prepare their own taxes. If they know what they’re doing and they enjoy doing it, then I encourage people to do it themselves because they won’t see value in the work of a tax professional.

I see no value in hiring someone else to do my lawn and driveway either. That’s what the teen-ager is for.

TaxGrrrl, Brady Passes On Super Bowl Prize As Butler Hauls In Truck & Tax Bill

Jim Maule, So Who Gets Taxed on the Super Bowl Truck?

Peter Reilly, Oil Rig Manager Does Not Qualify As Foreign Resident

Robert Wood, On-Demand Workers: It’s Tax Time, You’re Self-Employed, Audits Are Inevitable

Me, IRS issues 2015 vehicle depreciation limits, updates 2014 limits for Extension of Bonus depreciation

 

IMG_1273

 

TaxProf, The IRS Scandal, Day 641. Judicial Watch says it has received emails showing the IRS Office of Chief Counsel delayed the investigation into the Tea Party scandal.

The tax law is obese. So the supergenius behind Obamacare, Jonathan Gruber, has floated the idea of taxing folks based on body weightArnold Kling is comments wisely: ” I know that many of my progressive friends would be disgusted by the obesity, but that does not make it a public policy problem.”

That’s right, not every problem is a tax problem. Or even the government’s problem.

David Henderson has more: Jonathan Gruber on Sin Taxes (Econlog)

 

Kyle Pomerleau, Worldwide Taxation is Very Rare (Tax Policy Blog):

At the beginning of the 20th century, 33 countries had a worldwide tax system. That number slowly dropped to 24 countries by the 1980s. By the 2000s, the number of countries switching to territorial systems accelerated, with more than 10 countries switching in 10 short years. Nearly all developed countries have moved to the superior territorial tax system. Today there are only 6 countries that tax corporations on their worldwide income. The President’s proposal would double-down on the U.S.’s current system and push the United States further out of line with the rest of the developed world.

The U.S. is even more of an outlier on worldwide taxation of individual income, with only Eritrea joining us in taxing citizens abroad.

Tracy Gordon, Go Team: Score 1 for Obama on Ending Tax Subsidies for College Sports (TaxVox).

Sebastian Johnson, State Rundown 2/5: State of the States (Tax Justice Blog).

IMG_1286

Career Corner. Let’s Discuss: The Worst of Eating in the Audit Room (Marty, Going Concern)

Brian Gongol says “You’re not allowed to carry a bag of anthrax spores through a mall.” My bad. It won’t happen again.

 

Share

Tax Roundup, 10/28/14: Back-to-school edition! And: IRS says it will stop stealing.

Tuesday, October 28th, 2014 by Joe Kristan

The 2014 tour of Iowa begins. I am helping Roger McEowen and Kristy Maitre teach Day 1 of the Farm and Urban Tax School this year, and this morning we are starting the first of eight sessions in Waterloo. We hit Maquoketa Thursday.  Other sessions will be in Sheldon, Red Oak, Ottumwa, Mason City, Denison and Ames. It’s two great days of CPE, and it’s a bargain. Get your details and sign up for a convenient session at the ISU Center for Agricultural Law and Taxation today.  Here is the crowd this morning:

20141028-1

Looks like fun, no?

f you are a Tax Update reader, come see me (Hi, Kevin!). You qualify for a discount! Well, not really, but I can get you a free postcard from the DNR Chickadee Checkoff booth…

20141028-2

 

Have a nice day. We’re All Flies in the IRS’s Widening WebMegan McArdle on the IRS’s sudden turnabout on asset seizures stealing from innocent businesses after the New York Times reported on it:

It’s as if the IRS just noticed that they were grotesquely abusing their power in order to punish people who appear to have done nothing actually wrong. Did this not occur to them when the victims’ lawyers pointed it out? Did none of their thousands of employees wonder aloud whether they really needed to make war on America’s college funds?

I’m sure it was forced on them by budget cuts.

So think about what has happened to our government agencies. We passed a law, to raise taxes, or curb the usage of addicting drugs. That law didn’t work as well as we wanted, because a lot of people were evading it. So we passed new laws, to make it easier to enforce the original one, like requiring banks to report all transactions over $10,000. And then people evaded that, so we made another rule … and now people who had no criminal intent find themselves coughing up tens of thousands of dollars they shouldn’t owe. 

There’s a lot of that in the tax law. FATCA and the FBAR foreign financial account reporting requirements are classic examples of laws nominally aimed at big-time tax evaders that destroy the finances of thousands of innocent foot-faulters.

As in the case of the fly, we were better off leaving the original ailment alone. No, I’m not saying that we shouldn’t try to catch tax evasion. I’m saying we shouldn’t try so hard that we end up criminalizing a lot of innocent behavior. There are worse things than a country with some tax fraud. And one of those things is a government with vast and arbitrary power to punish people who have done no wrong. 

And a willingness to use it carelessly.

Joseph Henchman, IRS Promises to Curtail Property Seizures After Abuses Come to Light (Tax Policy Blog)

Kay Bell, IRS seizes honest taxpayers’ assets under forfeiture program. “Oh my Lord, IRS. What in the hell were you thinking?”

 

buzz20140909Paul Neiffer, IRS Disagrees With Morehouse Ruling (Of Course). It looks like they will continue to assess SE tax on non-farmers with CRP income outside the Eighth Circuit.

Robert D. Flach has fresh Tuesday Buzz!!

Tax Prof, Tax Revolving Door Enriches Former IRS Officials Who Cash in by Navigating Inversions Through Rules They Wrote. And Commissioner Koskinen approves.

 

Leslie Book, A Combo Notice of Deficiency Claim Disallowance Highlights Tax Court Refund Jurisdiction (Procedurally Taxing)

 

Jeremy Scott, Will a Graduated Income Tax Sink Martha Coakley? (Tax Analysts Blog)

Steve Warnhoff, Senators Defend LIFO, a Tax Break that Obama and Camp Want to Repeal (Tax Justice Blog)

 

TaxProf, The IRS Scandal, Day 537. Today’s scandal roundup features Bob Woodward saying “If I were young, I would take Carl Bernstein and move to Cincinnati where that IRS office is and set up headquarters and go talk to everyone.

Share

Tax Roundup, 10/13/14: Appeals Court holds CRP payments not Self-employment income to non-farmers. And: Extended due date looms!

Monday, October 13th, 2014 by Joe Kristan

binNot farming isn’t farming. That is one way to look at Friday’s decision by the Eighth Circuit in Morehouse that Conservation Reserve Program payments to non-farmers are not self-employment income. Overturning a Tax Court decision, a split three-judge panel rejected the IRS assessment of self-employment tax on landowners who enrolled in the CRP when they were not engaged in the trade or business of farming. The appeals panel said the CRP payments to hold erodable land out of production are instead rental payments with respect to non-farmers; real estate rental income is not subject to self-employment tax.

Roger McEowen, who worked on the case from the taxpayer’s side, has a detailed analysis of the case and its history. He summarizes the state of CRP law:

 Now, the Eighth Circuit’s reversal of the Tax Court means that non-farmers do not have to pay self-employment tax on CRP payments. That’s the case at least within the Eighth Circuit.  Active Farmers still have to pay on CRP payments unless the 2008 Farm Bill provision applies to them. But, non-farmers and non-materially participating farm landlords are given relief within the Eighth Circuit. For CRP rents paid after 2007, the question is whether the recipient is a materially-participating farmer.

The “2008 Farm Bill provision” holds that CRP payments are not self-employment income for recipients receiving Social Security payments.

In Iowa, taxpayers might want to think twice before taking their CRP payments out of self-employment income. Iowa has a special exclusion of capital gain income for taxpayers who have held land for ten years and who have also “materially participated” in a business with the land for ten years. The Iowa Department or Revenue in a recently-released decision said that it would consider a taxpayer to be “materially participating” in CRP ground if self-employment tax were paid. Given how much appreciation there has been on farm ground in recent years, paying a little self-employment tax might be worth it to avoid Iowa tax on a big farm sale gain.

Cite: Morehouse, CA-8, No. 13-3110.

Paul Neiffer has more: Morehouse Appeal is Released – Taxpayer Victory

 

20140513-1Making crashes more likely, for your safety The Chicago Tribune reports that Chicago shortened yellow light times to increase red-light camera revenues.  As Brian Gongol notes, this demolishes the argument that the cameras are for safety, rather than revenue: “It’s quite simple: If you want to cut down on red-light running and consequent crashes, you lengthen yellow lights and increase the gap between the red in one direction and the onset of green in the other.

Our local politicians never seemed very concerned about dangerous intersections until they found a way to make money off of them. Nor did they experiment with non-revenue safety options, like longer yellow cycles and a delay between the red one way and the green light the other, before turning on the revenue cameras.

 

Russ Fox, You Filed That Extension, And Only Now Are Realizing the Deadline is Wednesday… “First, in most cases tax professionals say it’s better to extend than amend. But extending is now out [1], so it’s better to get a reasonable return in.”

Peter Reilly, Paper Filing 1040 On October 15th? Go To The Post Office! Use Certified Mail:

 It is almost October 15th.  October 15 is the extended due date of your federal individual tax return.  If, like me, you still have not filed it and you are planning, unlike me, to paper file, use certified mail and save the return card when it comes back – especially if you owe money.

I e-file, myself, but if you are filing to claim a refund on a 2010 extended return, paper filing may be your only option — and then you absolutely should go certified mail, return receipt requested.

If you are an American abroad, Phil Hodgen explains how to obtain an Income Tax Return Extension Until December 15, 2014

TaxGrrrl, Trying To Reach IRS? Hold On Until Tuesday. Columbus Day, plus they shut down their computers for the weekend.

Tony Nitti, A Tale Of Two Activities: How To Beat The Hobby Loss Rules 

Jack Townsend, Bitcoins Update

Jason Dinesen, Glossary: Filing Status

20141013-1

TaxProf, The IRS Scandal, Day 522

William McBride, EPI Perpetuates Myth of Low Corporate Taxes. (Tax Policy Blog). A lesson on the dangers of ignoring the ascendance of pass-through entities.

Daniel Shaviro, Frontiers of quasi-tax fraud. “Because (a) partnership tax rules are so complex that only a handful of people really understand them – perhaps a thousand across the entire country? – and (b) people at the IRS generally don’t understand them, and (c) the audit rate for partnership tax returns is below 1%, compliance with partnership tax rules that are meant to block abusive tax planning that contradicts the actual tenor of the rules has pretty much completely collapsed.”

Renu Zaretsky, Cheap Talk, Scoring, and Promises, No, it’s not another night at the singles bar; today’s TaxVox headline roundup covers developments in the medical device tax repeal effort, loophole closers, and talk (just talk) of tax reform.

Sebastian Johnson, State Rundown 10/10: Lottery Bust, Music Credits on the Table (Tax Justice Blog). New York considers expanding corporate welfare to record companies, of all things.

 

Unlike the politicians, they at least give you what you pay for. A summary of tax cases involving prostitutes in the wake of the Cartagena Hooker scandal from Robert Wood.

News from the Profession. Which Accounting Firm Fired an Employee for His Dispute with Comcast? A: PwC (Caleb Newquist, Going Concern). And they fired me when I didn’t even have cable.

 

Share

Tax Roundup, 8/28/14: Frequent flying in the Tax Court. And: you don’t need 50 employees to face Obamacare problems.

Thursday, August 28th, 2014 by Joe Kristan

20120529-2TaxGrrrl, Tax Court Sides With IRS In Tax Treatment Of Frequent Flyer Miles Issued By Citibank.  TaxGrrrl reports on a case this week where a taxpayer was awarded with “points” for opening a bank account, which could be redeemed for airplane tickets.  A couple who cashed in the points for tickets worth over $600 received a 1099 for them and left it off their 1040.

TaxGrrrl reports:

Thankfully, the Tax Court did draw a distinction between the taxability of “Thank You Points” and frequent flyer miles attributable to business or official travel using Announcement 2002-18 (linked above), wherein the IRS made clear that they would not tax frequent flyer miles attributable to business travel. But that’s where the good news for taxpayers stopped.

TaxGrrrl thinks its a bad result:

In a case of what could be characterized as bad facts making bad law, taxpayers didn’t put up much of an argument for not including the income on the tax return: there was no lengthy brief explaining why it might be excludable. Nor did the IRS say much about the inclusion: they more or less took the position that Citibank’s form was enough to prove income, saying “we give more weight to Citibank’s records.”

The Tax Court made this a “reported” decision, which signals that they will side for the IRS in taxing miles that show up on 1099 information returns.

The tax law certainly allows non-cash transactions to be taxable.  If they didn’t, barter exchanges would rule the world.  It’s also true that at some point trying to tax everything of value doesn’t make sense.  You might value the smile from the cute barista on the skywalk, but that doesn’t mean you should pay tax on the extra value received with your coffee.  The hard part now is knowing when you cross the line.

Cite: Shankar, 143 T.C. 5

 

20121120-2Health Reimbursement Plans a danger under Obamacare.  Health Reimbursement Plans Not Compliant with ACA Could Mean Exorbitant Penalties  (Kristine Tidgren):

As of January 1, 2014, a number of long-time options became illegal under the ACA. Lest employers are tempted to ignore this issue, they should know that offering noncompliant plans subjects them to a possible excise tax of $100 per day per employee per violation. ACA violations are no small matter.

In IRS Notice 2013-54, issued last fall, the Treasury Department and the Department of Labor made clear that such plans are no longer allowed. This prohibition applies to a number of long-used standalone health care reimbursement plans that are not integrated with an ACA-compliant group health care plan. Although some exceptions apply, the ACA has made the following types of reimbursement plans illegal (subjecting their sponsors to the possible $100/day/employee/violation penalty tax):

  • Standalone §105 medical reimbursement plans (including Health Reimbursement Arrangements (HRAs))

  • Employer payment of individual health insurance premiums on a pre-tax basis

  • §125 salary-reduction plans for employee health insurance premiums


If you think that you don’t have to worry about Obamacare because you don’t have 50 employees, think again.


Roger McEowen, Structuring the Business: S Corporation or LLC?.  “But, beyond the requirement to pay reasonable compensation, the S classification provides a means for extracting money out of the business without paying employment taxes – there isn’t any employment tax on distributions (dividends) from the S corporation.”


20130311-1Jason Dinesen, Tax Preparer Ethics: Miscellaneous Deductions:

Is it okay to show the purchase as a miscellaneous deduction if the amount is less than 2% of their income and thus isn’t deductible anyway? That way, the taxpayer sees it on their tax return but technically the government hasn’t been harmed because the amount was too small to actually be deducted. Is this okay?

This can be tempting for a practitioner.  You can “take” a deduction for “subscriptions” that are probably Sports Illustrated and appease a pushy taxpayer without actually reducing taxes.  But Jason makes good points as to why it can make it hard to stop taxpayers from pushing for bogus deductions that actually matter.


Peter Reilly, Bank Out 40 Grand When It Allows Withdrawal Two Hours After IRS Levy.  Oops.

Kay Bell, Be tax smart in combining business and personal travel

Phil Hodgen, Toronto Consulate Wait Times Have Ballooned.  They’re lining up to get out from under U.S. taxation.  Phil offers this advice:

Many of you will want to renounce your U.S. citizenship before year-end. You can go anywhere in the world to do it. Start calling Consulates and Embassies to see what the wait time is.

Our experience is that the Caribbean and Central American countries are often good. Southeast Asia seems to be good as well.

That’s a sad commentary on how we tax Americans abroad.  Congress makes financial life miserable for expats, and then calls them “deserters” for doing something about it.

 

Stephen Olsen, Boeri: Not a citizen, never lived or worked in the US? IRS will still keep your money. (Procedurally Taxing).  Of course they will.  They’re bigger than you.

 

 

Remember, these are the people who think we preparers are out of control and in need of regulation.  IRS Ethics Lawyer Facing Possible Disbarment, Accused of Lying (Washington Times):

A lawyer in the IRS ethics office is facing the possibility of being disbarred, according to records that accuse her of lying to a court-appointed board and hiding what she’d done with money from a settlement that was supposed to go to two medical providers who had treated her client.

Of course, given Commissioner Koskinen’s policy of stonewalling and evasion, she might be just the woman he wants for the job.  (Via TaxProf)

 

 

William McBride, Canada’s Lower Corporate Tax Rate Raises More Tax Revenue (Tax Policy Blog):

The natural question is: How much tax revenue did Canada lose?

Answer: None.

canada corp revenue chart

You shouldn’t assume that the lower rate caused the revenue increases.  Still, when our current rates clearly incentivize tax-saving moves like inversions, you shouldn’t assume rate cuts will be big revenue losers, either.  The revenue-maximizing rate has to be influenced by rates charged in other jurisdictions.

 

Cara Griffith, Is the Dormant Commerce Clause in Jeopardy? (Tax Analysts Blog)  “In matters of state taxation, the dormant commerce clause provides a much stronger defense against discriminatory taxation than the due process clause.”

Kelly Davis, Cumulative Impact of Ohio Tax Changes Revealed (Tax Justice Blog)

 

TaxProf, The IRS Scandal, Day 476

 

News from the Profession.  California Board of Accountancy Moves to Stop Incarcerated CPA From Providing Exceptional Client Service in Prison

 

Share

Tax Roundup, 8/1/14: Links edition. And: no oppression.

Friday, August 1st, 2014 by Joe Kristan

Today is the annual office golf outing.  It’s also the one time I play golf each year.

For some reason golf is supposed to be fun for everyone, not just the three or four people in the office who actually have enough skill to enjoy the game.  I have proposed alternative field days, including all-office chess tournaments, shooting, rock climbing — things where I might be competitive — and have made no progress.  So golf it must be.

But I will wear my New Mexico hat, that’ll show them.

 

20130114-1Roger McEowen, Minority Shareholder in Closely-Held Farming Corporation Had No Reasonable Expectations that Majority Could Violate – Case Dismissed.

This case generated a controversial Iowa Supreme Court decision on the rights of minority shareholders.  The decision covered in Roger’s article was the trial court’s attempt to apply the Supreme Court’s decision to the facts in the case. Roger concludes:

The trial court’s remand decision is welcome relief for closely-held corporations in Iowa from an Iowa Supreme Court decision that is out-of-step with reality.  To find, as the Iowa Supreme Court did, that there can be shareholder oppression (with the likely result of corporate liquidation) where there isn’t even an allegation of a breach of fiduciary duties by the controlling shareholders would result in, as the trial court’s remand decision points out, oppression of the majority and could also result in corporate liquidation anytime a minority shareholder wants to “cash-out” for personal gain (as in the present case).  The trial court’s decision also upholds the use of bylaws that set forth stock valuation upon buy-out.  In this case, the Iowa Supreme Court allowed the minority shareholder to ignore the bylaw setting forth the valuation methodology for a buy-out (which he drafted), but the trial court held him to it.  That’s more welcome news for closely-held corporations.

This, too, can and probably will be appealed.

 

20140801-2Paul Neiffer, Pay Your Kids; It Saves Taxes!:

A farmer who operates as a sole proprietor may pay their children under age 18 wages and be exempt from payroll taxes.  If the farmer operates as a partnership (either regular or a LLC taxed as a partnership), paying wages to children under age 18 is still exempt from payroll taxes if the only partners of the partnership/LLC are parents of the children. 

But grandpa is out of luck.

From Jim Maule’s Tax Myths series, Retired People Do Not Pay Income Tax

Peter Reilly,Don’t Leave Money To Children Buried Under IRS Liens.  “Leaving money to someone who is subject to IRS liens can be like leaving money to IRS.”

Keith Fogg, When Should Bankruptcy Court Hear a Tax Case (Procedurally Taxing).

TaxGrrrl, Guilty Plea In One Of The Largest, Longest Running Tax Fraud Schemes Ever.  Kelly explains how some New York grifters milked the Treasury for years, stealing $65 million under the nose of Doug Shulman.

 

Joseph Henchman, Maryland Argues There’s No Constitutional Bar to Taxing Over 100% of Residents’ Income.  Maryland argues that it doesn’t have to allow a credit against county taxes for taxes paid in other states.  Joseph argues, I think correctly, that Maryland’s position is an unconstitutional burden on interstate commerce.

Howard Gleckman, How REIT Spinoffs Will Further Erode the Corporate Tax Base‘ (TaxVox).

 

20140801-1

 

Kay Bell, Seersucker Day returns to Capitol Hill, but lawmakers can’t deduct their special summer duds

TaxProf, The IRS Scandal, Day 449

 

Kelly Davis, ales Tax Holidays = Not Worth Celebrating (Tax Justice Blog).  “In the long run, sales tax holidays leave a regressive tax system basically unchanged.”

Iowa’s sales tax holiday for clothing and footwear is today and tomorrow.
News from the Profession.  Teamsters Get Dynamic With a Giant Rat at Grant Thornton’s Downtown NYC Office (Adrienne Gonzalez, Going Concern)

 

Share

Tax Roundup, 7/28/14: Out of the Wilderness edition.

Monday, July 28th, 2014 by Joe Kristan

Joe K as Ted KI’m back from the Philmont Scout Ranch.  81 rough and hilly miles in 10 days, not counting wrong turns, and all but about 12 with full pack.  The remainder were side trips up mountains.

It was a memorable and wonderful experience, even though I don’t intend to repeat it anytime soon.  I went with a great crew (including my younger son), and a skilled and wise adult “co-advisor,” so mostly I just got to enjoy the scenery and work on my new Unabomber Cowboy look.  I got a bunch of New Mexico mountain flora and fauna photos, many of which will be used as decoration on the Tax Roundups in the coming weeks.

I missed some tax stuff, which I will try to catch up on over the next few days.  I especially need to ponder the implications of the Halbig decision by the D.C. Circuit, striking down tax credits for Obamacare, and, perhaps, the employer and individual mandates for non-exchange state residents.

For the record, I had to clear my spam filter of 50,852 assuredly wonderful comments, and another 128 that got through the spambox for moderation. If you made a non-spam comment that I deleted, I’m sorry.  With so much spam, I have to take the spam filter’s word for it.

Today’s roundup will be abbreviated, as I still have to dig out from the usual post-vacation accumulation of chores.

 

20140728-1Roger McEowen, D.C. Circuit Says IRS Illegally Created Obamacare Tax; Fourth Circuit Sees No Evil.  “The D.C. Circuit’s decision relieves millions of persons from the penalty tax under I.R.C. Sec. 36B that the Congress did not state were subject to the tax.  Most assuredly, the government will ask the full court to hear reconsider the decision.”

TaxGrrrl, Courts Issue Conflicting Rulings On Obamacare Tax Credits: Which One Got It Right?   

William Perez, List of Sales Tax Holidays in 2014.  Iowa’s is this weekend.

Jana Luttenegger, Change in One-Per-Year Rollover Rules on IRA (Davis Brown Tax Law Blog)

Peter Reilly, Pulling IRS Into Your Business Dispute Might Not Be Such A Good Idea.  No kidding.

Robert D. Flach just keeps Buzzing!

 

Christopher Bergin, Inversion Diversion (Tax Analysts Blog):

There’s a lot more wrong with the tax system than corporate inversions. But that’s not the point. With all that’s going on in the world, when President Obama jumps on the anti-inversion bandwagon, it will give the official seal of approval to inversions as this summer’s red herring.  

The talk of corporations making tax moves as “deserters” is repulsive — as if their only duty is to generate revenue for Uncle Sam, without regards to their owners and customers.

Howard Gleckman, The Bring Jobs Home Act Won’t (TaxVox)

Joshua Miller, Richard Borean, Higher Education Tax Credits are a Windfall for Universities.  Of course they are.  You didn’t think they were for students, did you?

Accounting Today,  Former IRS Employee Arrested in Identity Theft Ring.  How do people think IRS regulation of preparers will stop fraud when IRS employment doesn’t.

TaxProf, The IRS Scandal, Day 445

News from the Profession.  This Complete Idiot Cheated on the Open Book Ethics Exam, Ratted Self Out. (Adrienne Gonzalez, Going Concern)

 

Share

Tax Roundup, 6/23/14: Making no friends edition.

Monday, June 23rd, 2014 by Joe Kristan
Rose Mary Woods checks her e-mail in the Nixon administration.

Rose Mary Woods checks her e-mail in the Nixon administration.

New IRS Commissioner Koskinen isn’t exactly making new friends for the agency in Congress.  His testimony Friday on the implausible rash of hard-drive failures that hit the IRS just as Congress began looking at Tea Party harassment amounted to an insistence that Congress take the IRS at its word, and give it more money.  From Tax Analysts ($link):

     “I don’t think an apology is owed,” Koskinen answered. “Not a single e-mail has been lost since the start of this investigation.”

Regarding the six other IRS employees who have experienced computer failures since the investigation began, Koskinen said technology experts told him that 3 to 5 percent of hard drives can be expected to fail during their warrantied lifetimes. 

It just happened to all the hard drives of the people most involved in beating up on the Tea Party.

This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

Commissioner Koskinen (correctly) points out that the IRS is underfunded for all of the chores (unwisely) given it by Congress.  With Congressional Republicans understandably reluctant to fund an agency it percieves, with justification, as its opposition, Mr. Koskinen ought to be going out of his way to assure them that he is making sure to eliminate political bias in the agency and to fully cooperate with the investigation.  He is doing nothing of the sort, and he may have already irretreivably lost his opportunity to convince GOP appropriators that he can be trusted.

IRS stonewalling isn’t a new thing.  As the many lawsuits filed by Tax Analysts to get the IRS to release its internal documents show, covering up is a way of life in the agency.  Christopher Bergin, in The Coverup Is Usually Worse Than the Crime (Tax Analysts Blog), gives some background:

Maybe it’s just sloppy record-keeping, which would be bad enough. Most of the government’s business is now conducted digitally, and those records need to be properly handled. Or is it worse? Is the IRS deliberately keeping things from the public? Excuse my cynicism, but the IRS’s penchant for secrecy is what led Tax Analysts, using the new Freedom of Information Act, to sue the agency in the 1970s to force it to release private letter rulings. There have been several subsequent lawsuits to pry records that should have been public out of the agency’s hands.

The idea that IRS emails are public records requiring preservation is nothing new, and was well-established at the time Ms. Lerner was busy.  It’s either negligent and outrageous incompetence or criminal destruction of public records, and to say that the IRS owes no apologies is to say that at least one of these unpleasant choices is just fine with him.

 

 

20140623-1TaxProf, The IRS Scandal, Day 410

Megan McArdle, An IRS Conspiracy? Not Likely … Yet.  “To be clear, of course six tragic hard drive failures in a relatively short period of time would make it very hard to believe in a benign explanation.”

Brian Gongol, Backing up your email isn’t hard to do.  “Someone should tell the IRS, which is making excuses for losing administrative emails — excuses that wouldn’t pass muster in an IRS audit

Russ Fox, We Don’t Need No Stinkin’ Backups

 

TaxGrrrl, Raking It In At Summer Yard Sales: Does Uncle Sam Get A Cut?   

Roger McEowen, U.S. Supreme Court Says Inherited IRA’s Not Exempt in Bankruptcy

Jason Dinesen, Bedside Manner is Important for Tax Pros, Too

Peter Reilly, Does Sixth Circuit ABC Decision Give Tenants Incentive To Buy?  “ABC Beverage Corporation is entitled to deduct the premium portion of the price it paid for the real estate as a cost of terminating the lease.”

 

Keith Fogg, D.C. Circuit Upholds the Constitutionality of Presidential Removal Powers of Tax Court Judges (Procedurally Taxing)

I think it’s only half-baked.  Stick a Fork in It: Is the Corporate Income Tax Done? (Joseph Thorndike, Tax Analysts Blog)

It’s not just a problem in Florida.  Seven indicted in Minnesota identity theft ring (TwinCities.com).

 

Wind turbineQuad City Times, Tax credits boost solar power in Iowa

David Henderson, Low-Carbon Alternatives: Solar and Wind Suck (Econlog).  “[A]ssuming reductions in carbon emissions are valued at $50 per metric ton and the price of natural gas is $16 per million Btu or less–nuclear, hydro, and natural gas combined cycle have far more net benefits than either wind or solar.”

 

Roberton Williams, U.S. Taxes Have Changed A Lot Since 1929 (TaxVox)

Steve Wamhoff,  Good and Bad Proposals to Address the Highway Trust Fund Shortfall (Tax Justice Blog).  The TJB has started putting individual author names on their posts, so I’ll do so too.

David Brunori, Tax Policy Is Not the Way to Deal With an Ass (Tax Analsyts Blog).  Not every problem is a tax problem.

Going Concern, IRS Can’t Afford to Upgrade to Windows 7 But Can Afford to Pay Microsoft to Use XP

 

Share

Tax Roundup, 6/12/14: Tax Credits run for governor. And: bad day for IRS in CRP tax case?

Thursday, June 12th, 2014 by Joe Kristan

20120906-1Crony tax credits have become an issue in Iowa’s race for Governor, reports The Des Moines Register:

The Republican Governors Association is out today with another TV ad attacking Jack Hatch.

The new ad accuses Hatch of sponsoring legislation to increase the availability of development tax credit while applying for tax credits for a real-estate project in Des Moines.

“Jack, isn’t that a conflict of interest?” the narrator asks.

It’s true that Mr. Hatch has been a successful player in the tax credit game.  It may be the merest coincidence that an awful lot of tax credits go to political insiders like Mr. Hatch and the spouse of Governor Branstad’s opponent in his first election.  But that’s not the way to bet.

While I’m all for anything that spotlights the inherent corruption of targeted tax credits, the Republican Governors Association may be inadvertently bringing friendly fire uncomfortably close to its own man.  For starters, the Governor is a five-term incumbent. If the system is set up to be played by political insiders, the Governor has had plenty of time to do something about it.

More importantly, political insiders can benefit richly from crony tax credits without claiming them on their own tax returns.  They benefit by claiming credit for the “jobs” generated by well-connected businesses that play the system to get the tax credits.  The Governor has played this game tirelessly.  Just off the top of my head

The $80 million+ in tax breaks for fertilizer companies.

The sales tax giveaway to the NASCAR track in Newton.

The rich tax breaks for data centers.

MP branstad

Governor Branstad, pre-mustache

In deals like this, the politicians claim credit for the jobs “created,” with no regard whether the lucky recipients of the breaks would have behaved differently without them, or for the jobs lost by other companies who compete with the winners for resources and customers, or for the jobs that would have been created had the funds been left with taxpayers to use without direction from politicians.

So yes, Governor, by all means call down the artillery on crony tax credits.  Just be sure to keep your helmet on.

Related:

The joys of cronyism

LOCAL CPA FIRM VOWS TO SWALLOW PRIDE, ACCEPT $28 MILLION

Governor’s press conference praises construction of newest great pyramids

 

20130114-1Roger McEowen, Eighth Circuit Hears Arguments in CRP Self-Employment Tax Case. “It would appear that the oral argument went well for the taxpayer.” 

Jana Luttenegger,  IRS Releases Taxpayer Bill of Rights.  “ These rights have always existed, but now the IRS has put the rights together in a clear, understandable list to be distributed to taxpayers.”  If they’ve always existed, they sure haven’t always been respected.

Peter Reilly, Your Son The Lawyer Should Not Be Your Exchange Facilitator.  Peter talks about the case I mentioned earlier this week, including another issue I left out.

 

Tax Justice Blog, Reid-Paul “Transportation Funding Plan” is No Plan at All:

Instead of taking the obvious step of fixing the federal gas tax, Reid and Paul propose a repatriation tax holiday, which would give multinational corporations an extremely low tax rate on offshore profits they repatriate (profits they officially bring back to the United States). The idea is that corporations would bring to the United States offshore profits they otherwise would leave abroad, and the federal government could tax those profits (albeit at an extremely low rate) and put the revenue toward the transportation fund.

Yeah, not a real fix.

Scott Hodge, Likely “Solutions” to Highway Trust Fund Shortfall Violate Sound Tax Policy and User-Pays Principle (Tax Policy Blog)

 

No Walnut STAndrew Lundeen, Higher Marginal Tax Rates Won’t Improve the World (Tax Policy Blog). “The Upshot and Dave Chappelle may be right that for someone with a $100 million that next dollar might not means as much as the first dollar. But that money doesn’t sit collecting dust. It is invested in the broader economy.”

Howard Gleckman, Did Multinationals Use a Foreign Earnings Tax Holiday To Burnish Their Financials Rather Than Reduce Taxes? (TaxVox)

Keith Fogg, Supreme Court’s Decision on Monday in Arkison Could Impact Kuretski Case and Constitutionality of the Removal Clause for Tax Court Judges (Procedurally Taxing)

Jack Townsend, BDO Seidman Personnel Sentenced for B******t Tax Shelter Promotion 

Kay Bell, NBA beats NHL in this year’s jock tax championship 

 

TaxGrrrl, Waffle House Refuses To Allow Waitress To Keep $1,000 Tip   

 

Share

Tax Roundup, 5/8/14: No, Virginian, there is no travel expense Santa Claus. And more!

Thursday, May 8th, 2014 by Joe Kristan

20120801-2News Flash: Tax Court Judges didn’t just fall off the turnip truck.  That insight might have occurred to a Virginian after yesterday’s Tax Court decision denying $64,775 in 2010  “car and truck expenses” for a “mobile advertising business” that grossed $7,200 in revenue.

The Virginian worked full-time for Verizon while traveling up a storm — 129,550 miles in 2010, by his own account.  Special Trial Judge Dean questioned The Virginian’s work ethic (my emphasis):

The number of hours petitioner worked for Verizon and purportedly drove for his mobile advertising business simply strains credulity. Petitioner’s monthly mileage for 2010 ranged from 7,419 miles to 17,864 miles. Petitioner testified that he drove at approximately 60 miles per hour. If it is possible that he could average 60 miles per hour in the month that he drove 17,864 miles, he spent at least 300 hours on the road that month or almost 10 hours a day. All this while working full time for Verizon.

The judge also has doubts about the business model:

Furthermore, petitioner’s extensive driving does not appear to be ordinary and necessary to his mobile advertising business. Petitioner claims that he drove all over the United States to post fliers and to advertise his own mobile advertising business, even though most of his clients were local clients except one online refinancing company. All the while, petitioner had very little income in relation to the excessive costs he incurred driving to put up flyers. Furthermore, the advertising for his own business appeared to be fruitless, as he never made a profit in any of the six years he engaged in the business, despite incurring great costs traveling to advertise mobile advertising business.

20140508-2But ultimately none of that mattered, because The Virginian failed to cross the initial threshold for deducting any sort of travel expenses — Section 274:

Notwithstanding whether petitioner’s excessive driving was ordinary and necessary for his mobile advertising business, he simply did not satisfy the strict substantiation requirements of section 274(d) for claiming car and truck expenses… Petitioner had no backup receipts and no beginning and ending mileage for the automobile he allegedly used. 

Section 274(d) requires taxpayers to document travel expenses “by adequate records or sufficient evidence”

-the amount of expense,

-the time and place of the travel, and

-the business purpose of the trip.

For travel, that means receipts where possible (e.g., hotels), and contemporaneous calendars or logs documenting mileage.  Without that, your work ethic and business model doesn’t even come into play.

Cite: Abelitis, T.C. Summ. Op. 2014-44.

 

20130114-1Roger McEowen, IRS Says Agents Acting Under Power of Attorney Subject to FBAR Reporting.  “The agent (along with the principal) is subject to the FBAR filing requirements if the POA gives the agent signature authority over a foreign account that exceeds the dollar threshold.” 

 

TaxProf, The IRS Scandal, Day 364.  Big day tomorrow.

TaxGrrrl, UPDATED: Timeline Of IRS Tax Exempt Organization Scandal.  It started with a planted question to try to blunt the impact of the impending TIGTA report that pointed out the targeting.

Kay Bell,  Lois Lerner held in contempt of Congress, ramping up next phase of midterm election year political posturing.  Yes, posturing is occurring — that’s what politicians do.  But Sam Ervin’s posturing — and he did his share — didn’t make Watergate less a scandal.

 

Cara Griffith, Transparency Versus Disclosure of Taxpayer Information (Tax Analysts Blog)  “…the disclosure of documents that contain taxpayer information, whether required by state law or the result of litigation, does not encourage transparency in tax administration.”  I agree; unfortunately, the IRS hides behind dubious assertions of confidentiality to cover up its own questionable behavior.

 

Jason Dinesen, Hold the Phone on the IRS E-file Outrage Machine.  No, don’t.  It’s still outrageous.

20140508-1Peter Reilly, Nonrecognition On Divorce Transfers Hurts Receiving Spouse .  It did in this case, when the recipient spouse had to pay tax.   Taxpayers receiving property in divorce receive the other spouse’s basis, and the other spouse doesn’t have a taxable sale.  But it’s still good policy.  Property settlements are contentious enough without hitting somebody giving up property with income tax on that dubious privilege.  Also, if the IRS got a cut, there would be less marital property to split in the first place.

Alan Cole, Failing by its Own Standard: What DC’s Insurance Tax Tells Us About its Obamacare Exchange (Tax Policy Blog)

Tax Justice Blog, What’s the Matter with Kansas (and Missouri, and …). “An anti-tax, Republican super majority in the Missouri Legislature claimed victory yesterday in a year-long battle with Gov. Jay Nixon over taxes by voting to override Nixon’s veto of a $620 million income tax cut.”

Do tell.  California Legislative Analyst’s Office Raises Concerns with Film Tax Credits (Lyman Stone, Tax Policy Blog).

Renu Zaretsky rounds up tax headlines for TaxVox with Contempt, Audits, Health Care, and Highways.

Janet Novack, Mansion Tax Kills Some Million Dollar Home Sales, Study Concludes.  Taxes always matter.

Jack Townsend, Another Foreign Account Sentencing.

 

Quotable:

The practice of regularly renewing the extenders package is unfortunate and should be stopped. It distorts the budget process, encourages legislative rent seeking, and invites highly particularistic legislative provisions that are better characterized as windfalls and wasteful government spending rather than well-targeted tax incentives.

Victor Fleischer,  Tax Legislation in the Contemporary U.S. Congress (Via the Taxprof)

News from the Profession: Grant Thornton Tries to Motivate With the Human Centipede, or Something (Going Concern)

 

Share

Tax Roundup, 5/1/14: Iowa remains on top! Oh, that’s bad.

Thursday, May 1st, 2014 by Joe Kristan

The Iowa House of Representatives has adjourned for the year.  That makes it official: Iowa will continue to have the highest corporation income tax rate in the U.S. for another year, as shown on this map from The Tax Foundation:

2014 Corporate Income Tax Rates

The U.S has the highest corporation tax rate of all OECD countries, so that means right here in Iowa we have the highest corporation income tax rate in the entire developed world.  That’s true even taking into account Iowa’s 50% deduction for federal corporation tax.  Whoopee.  That must mean that Iowa receives just gushers of corporate cash, right?

Wrong.  The Iowa corporation tax generated $403.6 million net revenue in calendar 2013, amounting to about 5.3% of state tax revenues.  The individual income tax, by contrast, generated $3.45 billion net revenue in the same period. (Figures available here.)

The net is so low because the corporation tax, like the Iowa income tax, is riddled with special credits and deductions for the well-connected and well-lobbied.  Some of the biggest corporations in Iowa pay no tax and, in fact, actually get multi-million dollar checks out of the Department of Revenue.

There’s nothing good about this system.  It’s brutal for small corporations without the lobbyists and pull to land big breaks.  Meanwhile, big corporations use their resources to skip around the tax, or even to profit from it.  The high rates and complexity drives away corporations who don’t want to play the influence game, while luring those who play it like a fiddle.  Far better to wipe out the tax and the accompanying subsidies with something like The Tax Update Quick and Dirty Iowa Tax Reform Plan!

Related: David Brunori, I Will Ask Again, Why Are We Taxing Corporate Income? (Tax Analysts Blog). “There is an increasingly influential school of thought that says the tax is borne by labor in the form of lower wages.”

 

Peter Reilly, Alimony That Does Not Look Like Alimony.  “So if an agreement says that the payments are to be treated as alimony for tax purposes, that really means nothing.  What matters is whether the requirements are met…”

 


20130114-1Roger McEowen, 
Analyzing Hedging under Obamacare’s Net Investment Income Tax Final Regulations.  “… a sole proprietor farmer’s income from hedging activity, or hedging income of a farming entity structured as pass-through entity is not subject to the NIIT, because the farmer or entity is engaged in the trade or business of farming and not the trade or business of trading in commodities.” 

William Perez, Tax Reform Act of 2014, Part 7, IRS Administrative Proposals Impacting Individuals.

Annette Nellen, How sales tax exemptions can waste one’s time.  “Recent litigation in Missouri over whether converting frozen dough into baked goods is “processing,” such that the electricity used is exempt from sales tax, shows the time and money that can be wasted with pointless rules.”

TaxGrrrl, Considering The Death Penalty: Your Tax Dollars At Work.  It should give pause to those who think the government should be the provider of health care when it can’t even kill somebody well.

Um, to save hundreds of millions of shareholder dollars?  Why Does Pfizer Want to Renounce Its Citizenship? (Tax Justice Blog). 

 

20121004-1Renu Zaretsky, Competition and Tax Reform: A Thorn in Everybody’s Side.  The TaxVox headline roundup.

Kay Bell, Amazon begins collecting sales tax from Florida buyers May 1; Will the online retailing giant lose even more customers?

Stephen Olsen, Did Donald Rumsfeld Just Invalidate His Return?  (Procedurally Taxing) “…he just wanted to be able to understand how his tax bill was computed.  Overall, not an unreasonable position, but perhaps a pipedream.”

Jack Townsend, Another Credit Swiss Related Bank Enabler Pleads Guilty

 

taxanalystslogoCara Griffith, The Problem With Outcome-Based Jurisprudence (Tax Analysts Blog).  ” It is not for the court to worry about how the state will fashion a remedy. Its task is to interpret and enforce the state’s laws and strike down those that are unconstitutional.”

 

The newest Cavalcade of Risk is up!  The roundup of insurance and risk management posts is hosted this time by Rebecca Shafer.  Our old friend Hank Stern contributes with bad news on the ACA computer security front: My Bleeding (404Care.gov) Heart

 

TaxProf,  The IRS Scandal, Day 357.  For a “phony scandal,” it’s awfully persistent.

 

The soft bigotry of low expectations.  IRS Commish Reminds Senator That Hill Staffers Have Worse Tax Compliance Than IRS Employees (Going Concern)

 

Share

Tax Roundup, 4/22/14: $418,000 per-job edition! And: AGI and farm subsidies.

Tuesday, April 22nd, 2014 by Joe Kristan

20120906-1Iowa Watchdog reports Iowa to give Microsoft millions in exchange for 86 jobs:

The West Des Moines City Council on March 24 approved asking the IEDA to award Project Alluvion $18 million in sales tax rebates, the maximum amount possible under the IEDA’s High Quality Jobs Program.

Neither the city nor the IEDA questioned why Microsoft, which had $24.5 billion in revenue and $8 billion in profits in the most recent fiscal quarter, needed taxpayers’ support to build its data center.

By the time the new data center opens for business, Microsoft will have received from the state and the city more than $418,000 for each of the 86 jobs it says it will create.

There’s a good argument that businesses shouldn’t have to pay sales taxes on their purchases. There’s no good argument that only businesses who know how to pull strings in city hall and at the statehouses should be able to avoid sales tax on their inputs.  Yet that’s what Iowa’s “economic development” policy is all about: special deals for special friends.  The rest of you suckers without lobbyists and pull, pay up!

Related: LOCAL CPA FIRM VOWS TO SWALLOW PRIDE, ACCEPT $28 MILLION

Tax Justice Blog, State News Quick Hits: Tax Breaks for Expensive Artwork and Apple Inc.

microsoft-apple

 

Roger McEowen, Farm Service Agency Adjusted Gross Income Calculation Could Influence Choice of Entity:

Beginning with the 2014 crop year, producers whose average adjusted gross income (AGI) exceeds $900,000 are not eligible to receive payments or benefits from most programs administered by FSA and the Natural Resources Conservation Service (NRCS). Previous AGI provisions distinguishing between farm and non-farm AGI are no longer utilized.  Average AGI for crop year 2014, for example, will be based on a producer’s AGI from 2010, 2011 and 2012.

This is an incentive for business owners receiving substantial farm subsidies to use C corporations, which don’t increase AGI, at least not immediately.  But C corporations do increase the effective tax rate on business income for most people who have enough AGI to worry about this problem.  It would be a lot easier to get rid of the subsidies and let farmers just grow what the market demands.

 

Yesterday was the national commemoration of The Tax Foundation’s Tax Freedom Day.   Not surprisingly, it’s later than last year.

Tax Freedom Day is “the day when the nation as a whole has earned enough money to pay its total tax bill for year.”  It varies by state.  Iowa’s day was April 13.  Connecticut and New Jersey will be the last states to finish paying their tax bill, on May 9.

Tax Freedom Day 2014 Map_0

 

TaxProf, GAO: IRS Audits 1% of Big Partnerships, 27% of Big Corporations

Jeremy Scott, The Misleading Debate About the Corporate Income Tax (Tax Analysts Blog):

Congress must consider passthroughs when discussing business tax reform. You can’t complain about high U.S. corporate tax rates or declining corporate tax revenues without looking at how the shift to passthrough entities is affecting the U.S. tax system. Passthrough reform is just as critical as corporate reform, even if it doesn’t receive nearly as much attention in congressional speeches or front-page news stories.

It won’t happen until the inane quest to hammer “the rich” is decisively rejected in tax policy debates  — because with pass-throughs, taxing “the rich” means taxing away employment.  Yet the same high-tax redistribution schemes have led to disaster over and over are enjoying a new vogue among people who just can’t stand other people having more money.

 

20140321-3Jack Townsend, GE Ducks Any Penalty for Its (BS) Tax Shelter — For Now 

Brian Mahany, Is the IRS Whistleblower Program a Failure?

TaxGrrrl, Higher Or Lower: How Do You Think Your U.S. Tax Burden Compares To Other Countries?   

Steven Rosenthal, A Flash Tax for the Flash Boys (TaxVox).  Never mind that high-frequency traders make for more efficient markets and lower transaction costs for other traders.  We need to screw up the capital markets even more.

Annette Nellen, Tax Day – April 15, 2014 – It Can Be Easier.  It sure could be.

TaxProf, The IRS Scandal, Day 348

 

William Perez, Obamas, Bidens Release 2013 Tax Returns.  I still say they should have had to prepare them by themselves in a live webcast — as should all congresscritters.

Russ Fox, If You Can’t Get the Refund, Why Not File Some Liens?  After all, it is a foolish and futile gesture, so go for it!

Peter Reilly, Court Approves Tax Sale Of New Mexico Property For Less Than 1% Of Its Value.  Peter sheds light on the sleazy practice of what amounts to stealing property to pay petty amounts of tax.

Jason Dinesen, On Schedule C’s and Setting Rates.  If your 1040 is really a business return, you can’t expect to pay the same as a 1040A filer.   In many ways Schedule C’s are harder, because they rarely have a balance sheet to provide a reality check.

 

20120620-1

Robert D. Flach’s Buzz is Back!  Welcome back, Robert!

Kay Bell, How are you spending your federal tax refund?

Jana Luttenegger, Are You Curious How Your Tax Dollars Were Spent? (Davis Brown Tax Law Blog)

News you can use.  Timely Filing a Tax Court Petition from Prison (Carl Smith, Procedurally Taxing)

Breaking!  Millennials Don’t Like Grunt Work, Says Millennial Grunt (Going Concern).  Hey Millennials, the rest of us aren’t so crazy about it either.  That’s why they have to pay us to do it.

 

Share

Tax Roundup, 4/8/14: So what do I do with the K-1? And: they also serve who go away!

Tuesday, April 8th, 2014 by Joe Kristan

So the K-1 finally showed up from my partnership or S corporation investment.  Now what?

Remember that the K-1 represents your share of the income and expenses of the partnership/S corporation/trust (henceforth “thing”) that issued it.  Different pieces of income and expense are treated differently on your tax return, and the K-1 tells you where your pieces go.  Sort of.  Before you get started plugging in your numbers, you should answer some questions for yourself.

- Do I “materially participate” in this thing? Your level of participation determines the forms you start with in preparing your returns, whether you can deduct losses, and whether your income from the thing is is subject to the Obamacare 3.8% Net Investment Income Tax.  If you spent more than 500 hours working in the thing, that usually means you materially participate; a more complete discussion of material participation is found here.

- Did the thing lose money?  If it lost money, then you have to clear three hurdles to deduct the losses:

1. You have to have basis.  This starts with your investment in the thing.  If you loaned money directly to the thing, you will get basis for the loan.  If you have a partnership, you will get basis for your share of the partnership debt, shown in part L of your K-1.  S corporation shareholders don’t get basis for their share of the corporation’s debt, even if it is guaranteed by hte shareholder.  Your basis is increased for your share of the thing’s income, and it is reduced for losses and distributions.  If you have no basis, you can’t take losses.

2. Your basis has to be “at-risk.”  This normally means that you are out-of-pocket for the investment.  If your basis comes from borrowed funds, you have to be personally on the hook for the debt — but if you borrowed from somebody with an interest in your thing, you might not be “at-risk” even if you will have to pay up if thing defaults.

If your basis comes from a share of the partnership debt, you are normally considered “at-risk” for debt shown on the “Recourse” and “Qualified Nonrecourse financing” lines on part K of your partnership K-1.  Your at-risk amount is computed on Form 6198,

3. You have to materially participate (see above), or have “passive” income from other activities.  If you don’t materially participate, you need to go to Form 8582 to figure how much, if any, of your loss is deductible this year.

 Got that?  Tomorrow we’ll look at what you have to do after you answer these questions.  Come back every day through April 15 for more !

 

Senator Hubert Houser

Senator Hubert Houser

Legislator of the Century.  Yes, the century is young, but it will be hard to beat the accomplishment of Iowa state senator Hubert Houser.  He went home.  From The Des Moines Register:

At issue is the fact that Houser, a Republican from Carson in southwest Iowa, hasn’t resigned. He has simply stopped coming to the Statehouse, saying he isn’t needed as a minority caucus member and doesn’t have a role in any legislation. He says it’s more important for him to spend time on his family’s farm, where he is expanding the livestock facilities.

Houser was not present in the Senate chamber again on Monday.

Secretary of the Senate Michael Marshall said Monday that Houser is still receiving his annual salary of $25,000.

The coverage implies that Sen. Houser is doing a bad thing.  Considering the dubious accomplishments of the ones that do show up, I can’t agree.  We’d be better off if they all went home.  The legislators should get all of their pay on Day 1 of the session, and they should get docked if it goes past a month.

 

Of course they do.  Iowa House panel OKs $2 million tax break for Knoxville Raceway.  (Des Moines Register)

 

RashiaQueen of IRS tax fraud needs a break.  Rashia Wilson, who famously held up big wads of cash on her Facebook page and taunted the feds to come and get her, is less liquid nowadays, according to a report by tampabay.com:

Busted down to a federal prison in Aliceville, Ala., she earns just $5.25 a month, she declares in newly filed court papers. That’s a problem because Wilson, 28, was ordered to pay a token $25 per calendar quarter toward the $3.1 million in restitution that she owes the IRS for filing false tax returns using stolen identities. She needs money to buy vitamins and hygiene items, too, she says. So she’s asking U.S. District Judge James S. Moody Jr. to suspend restitution payments until after her release date: Jan. 5, 2031. 

Then she’ll really get after it, I’m sure.

 

Peter ReillyNo Money For April 15 1040 Balance Due? Don’t Panic!

Tony Nitti, Where Is Your Tax Home When You Work In A Foreign Land?   

Jason Dinesen, Tax Court Case Involving Radio DJ Strikes Close to Home for Me.  “I used to work in radio. I was the news director at KNOD radio station in Harlan, over in the western part of Iowa.”

I had a brief stint as an unpaid intern for KHAK, a country station in Cedar Rapids, in 1980.  I learned that I have a face for radio and a voice for print.

 

Roger McEowen and Kristine Tidgren, Understand That Easement Agreement Before You Sign It

 

Locust Street, Des Moines

Locust Street, Des Moines

TaxGrrrl, New IRS Commissioner Talks Tax, Scandal and Congress.  She gives him more credit than I do.

Andrew Lundeen, Kyle Pomerleau, Americans Pay More in Taxes than on Food, Clothing, and Housing Combined (Tax Policy Blog)

Renu Zaretsky, Ethics and Fairness, Growth and the Environment, Retirement and Tax Shelters.  The TaxVox headline roundup ponders, among other things, whether we should subsidize wind turbines forever.

Kay Bell, Energy efficient home improvement tax break might be back

TaxProf, The IRS Scandal, Day 334

News you can use. How to Cheat on Your Taxes. (David Cay Johnston, via The Taxprof)

News from the Profession.  According to Research, You Are Fat Because Busy Season (Going Concern)

 

Share

Tax Roundup, 3/31/14: A little fire won’t stop us!

Monday, March 31st, 2014 by Joe Kristan

There was a little disruption around the Tax Update neighborhood over the weekend.  The 115 year-old Younkers Building, kitty-corner from our quarters in The Financial Center, burned over the weekend.  It was being renovated into apartments and shops when it caught fire early Saturday morning.  Here’s how it looked yesterday from one of our conference rooms:

20140330-1

 

While our neighbors in Hub Tower and the EMC Building are closed today, Roth & Company is open for business.  If you need to visit us, you have to enter on the Mulberry Street side; the Walnut side is closed by police order.  You can still reach the parking garage, but you have to come from Mulberry and turn north onto the little stub of Seventh Street left open to allow garage access (it’s normally one-way, Southbound, but it’s one-way northbound until they can re-open Seventh Street, and that doesn’t seem likely for awhile).  We are cut off from the skywalk system, for now. (Update, 8:54: we have Skywalks!  Both to Hub Tower and the EMC building).

Other Tax Update coverage:

Sunday Morning Skywalks.

Goodbye, Younkers Building.

A VISIT(ATION) TO DOWNTOWN YOUNKERS

DOWNTOWN YOUNKERS PICTURES

And some sound advice from Brian Gongol: “Make sure you have an offsite, offline backup of your critical work and personal files. You never know when a catastrophe will strike.”

Roger McEowen, U.S. Tax Court Deals Blow to IRS on Application of Passive Loss Rules to Trusts: “The case represents a complete rejection of the IRS position that trust aren’t “individuals” for passive loss purposes and the notion that only the trustee acting in the capacity of trustee can satisfy the test.”

William Perez, April 1st Deadline to Take Required Minimum Distributions for 2013:

Individuals who reached age 70 and a half years old in 2013 are required to begin withdrawing funds from their tax-deferred retirement plans no later than April 1, 2014. This applies to traditional individual retirement accounts (IRAs) and employer-based retirement accounts, such as a section 401(k), 403(b) or 457 plan.

You can get hit with a 50% excise tax on the required distribution amount if you fail to take it.

Jana Luttenegger, FICA Taxes on Severance Payments (Davis Brown Tax Law Blog)

Kay Bell, Selfies used as tax claim documentation, audit defense.  Not a bad idea.

 

20131206-1Arden Dale, A New Reason to Hoard Assets (WSJ):

In particular, taxpayers are taking advantage of a tax break known as the “step-up in basis,” in which the cost basis of a house, stock or other asset is determined by its current market price rather than when the deceased person acquired it.

Heirs get the step-up when they inherit the asset, and it can save them a lot in capital-gains taxes when they sell.

Gift recipients get only the donor’s basis, while the basis of inherited property is the value at the date of death.  Now that couples can die with over $10 million without incurring estate tax, it often makes tax sense to hold low-basis assets until death so heirs can dispose of them without incurring capital gains taxes.

 

Greg Mankiw,  The Growth of Pass-Through Entities:

Over the past few decades, there has been an amazing shift in how businesses are taxed.  See the figure below, which is from CBO.  Businesses are more and more taxed as pass-through entities, where the income shows up on personal tax returns rather than on corporate returns.  (Here is an article discussing how the mutual giant Fidelity recently switched from one form to the other.)

This phenomenon complicates the interpretation of tax return data.  For example, when one looks at the growth of the 1 percent, or the 0.1 percent, in the Piketty-Saez data, that growth is likely exaggerated because some income is merely being shifted from corporate returns. I don’t know how much.  If someone has already quantified the magnitude of this effect, please email me the answer. If not, someone should write that paper.

This is clearly true.  While I can’t quantify the effect on inequality statistics, it has to make a difference, now that a majority of business income is reported on 1040s:

Source: The Tax Foundation

Source: The Tax Foundation

In 1980, corporate returns reported about 2/3 of all business income; by 2010, the Form 1120-share of business income was down to about 43%.

 

Lyman Stone, Maryland Threatens to Confiscate “House of Cards” Set (Tax Policy Blog).  “High taxes and big incentives don’t seem to be working very well in Maryland right now.”  They should follow Iowa’s example and limit filmmaker subsidies to three hots and a cot.

BitcoinMegan McArdle, The IRS Takes a Bite Out of Bitcoin

Annette Nellen, Guidance on taxation of virtual currency

TaxProf, The IRS Scandal, Day 326

Tax Justice Blog, Grover Norquist cares a lot about Tennessee taxes. You should too.

Renu Zaretsky, Tax Reform, Tax Expenditures, and Kevin Spacey (TaxVox).  A roundup of tax headlines.

Jack Townsend, Tenth Circuit Opinion on Mens Rea for Tax Obstruction – What Does Unlawful Mean?

 

The Critical Question.  Am I a Hypocrite on Preparer Regulation?  (Jason Dinesen): 

I oppose regulation of tax preparers. But yet, I will tout my own licensing at the expense of an unlicensed preparer if the situation presents itself.

But nobody makes Jason do this, and if somebody wants to pay less for an unlicensed preparer, Jason isn’t preventing that.  If he replaced “but yet, I will” with “I prefer to,” it would be correct.

 

News from the Profession.  Per Criminal, PwC is Preferred Audit Firm for Criminals (Going Concern)

 

Share

Tax Roundup, 1/31/14: Earned Income Tax Credit Awareness Day party edition! And: e-filing begins.

Friday, January 31st, 2014 by Joe Kristan


EITC error chart
Yes, for those of you not already taking the day off to observe it, today is Earned Income Tax Credit Awareness Day!  Let’s celebrate with a true story of EITC awareness.

Cedar Rapids tax preparer Demetries Johnson displayed her awareness of the credit in a big way:

Defendant DEMETRIES JOHNSON notified some taxpayers seeking her services that she could obtain larger tax refunds than they would otherwise receive.  To obtain refunds, defendant DEMETRIES JOHNSON would knowingly report false information on taxpayers returns. The claims made in the tax returns were false, fictitious, and fraudulent in that the claims for refunds, for example: 1) falsely reported income when little or no income was earned, thereby substantially and materially overstating taxpayers’ income in a manner that made the taxpayer appear eligible for a refund by virtue of the EITC; and 2) falsely included a child or children on taxpayers’ returns who did not in fact qualify under the EITC.  Through submission of these false claims, defendant DEMETRIES JOHNSON increased payments made by the Internal Revenue Service to the taxpayers or to bank accounts controlled by the defendant.

Her awareness ended up earning a two-year prison sentence after she pleaded guilty to tax charges.  Her keen level of awareness isn’t uncommon; a recent Treasury Inspector General analysis showed that 21-25% of the $13 billion of the credit issued annually is claimed “in error.”  No small amount of those errors are deliberate.

Those who scam the system are especially aware that the credit is “refundable.”  If you claim more credit than you owe in taxes, the IRS will send you a check for the excess.  Like all refundable credits, it attracts fraudsters.

Come to think of it, maybe “awareness” isn’t the real problem with the Earned Income Credit.

 

Flickr image courtesy Shock264 under Creative Commons license

Flickr image courtesy Shock264 under Creative Commons license

When you buy a round, it’s always popular Wind industry fears slowdown as Congress considers future of popular tax credit  (Des Moines Register).  The recipients of wind subsidies delivered through the tax law are annoyed that there is a delay in getting their free stuff.

The headline says the wind turbine subsidy is “popular,” but nothing in the article backs that up, or even repeats the claim.  I suppose it’s as popular with the Warren Buffet-controlled utility that is a big recipient of the credit as the Earned Income Tax Credit was with Demetries Johnson’s clients.

 

Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

TaxProf, The IRS Scandal, Day 267.  He highlights today’s Peggy Noonan piece:

 Meanwhile, back in America, conservatives targeted and harassed by the Internal Revenue Service still await answers on their years-long requests for tax exempt status. When news of the IRS targeting broke last spring, agency officials lied about it, and one took the Fifth. The president said he was outraged, had no idea, read about it in the papers, boy was he going to get to the bottom of it. An investigation was announced but somehow never quite materialized. Victims of the targeting waited to be contacted by the FBI to be asked about their experience. Now the Justice Department has made clear its investigation won’t be spearheaded by the FBI but by a department lawyer who is a campaign contributor to the president and the Democratic Party. Sometimes you feel they are just laughing at you, and going too far.

For a case where a key figure promptly hid behind the Fifth Amendment, the FBI was sure quick to conclude there was no crime.

 

William Gale, Benjamin Harris, David John, State of the Union Speech Promotes New Retirement Savings Vehicles (TaxVox):

 Similar to the R-Bond discussed in a recent AARP Public Policy Institute paper written by William Gale, David John and Spencer Smith, MyRA would allow individuals to save in a government bond account similar to the one offered as an option to federal employees through the Thrift Savings Plan. The details are unclear (there’s a WhiteHouse fact sheet here), but MyRA would allow new savers and those with small balances to accumulate retirement savings without either having to pay administrative charges or face market risk.

Just inflation and government policy risk.

 

20130916-1TaxGrrrl, IRS Officially Opens Tax Season Today, Begins Processing Returns and Refunds

William Perez, IRS’s Electronic Filing Systems Opens January 31

Kay Bell, Are you ready to e-file your federal tax return? Here’s how.

Trish McIntire, IRS Notice Prevention

 

Fear the Family (and other related parties).  My new post at IowaBiz.com, the Des Moines Business Record Business Professionals Blog.

 

Kyle Pomerleau notes A Few Contradictions in President Obama’s State of the Union Address (Tax Policy Blog)

Keith Fogg, Does Treasury’s Policy Restraining Referrals to Low Income Tax Clinics Harm Individuals and the Tax System? (Procedurally Taxing)

Robert D. Flach serves up his last Buzz for awhile as he begins his tax season hiatus.  It’s his 43rd tax season.  If I hit my 43d tax season, it will be in my 68th year.  I admire Robert’s endurance, but I have no plans to match it.

 

haroldDirector of Chartered firm among 13 charged over £2.5m film tax fraud (ifaonline.co.uk).  I think film tax credits are the bait car of tax incentives.

Useless tool.   Treasury Nominee Dynan Calls Home Buyer Tax Credit ‘Useful Tool’ (Tax Analysts, $link).  Not only should her nomination be rejected on the basis of her approval of the failed and fraud-ridden credit, she should be presumed self-disqualified from any public position ever.

While I think the court decision ending tax-free treatment for cash parsonage allowances is likely to stand, not everyone agrees.  Zelinsky: The First Amendment and the § 107 Parsonage Allowance (TaxProf)

 

Tax Trials continues its “Famous Fridays” series with Pete Rose, Gambling Winnings Are Income Too.

News from the Profession: PwC Doing Its Part to Keep Dog Tails Wagging in Northeast Ohio (Going Concern)

 

Share