Posts Tagged ‘scams’

Tax Roundup, 2/11/14: Employer mandate “shared responsibility” delayed for some. And: fresh scam!

Tuesday, February 11th, 2014 by Joe Kristan

20121120-2It’s such a disaster, we’re only going to force some employers to do it right now. The IRS has issued final regulations on the employer health insurance mandate that delay their impact on companies with 50-100 employees until 2016.  The “shared responsibility provisions” — such a creepy name — will still apply to employers with 100 “full-time equivalent” employees in 2015.  The Wall Street Journal reports:

 Under the original 2010 health law, employers with the equivalent of at least 50 full-time workers had to offer coverage or pay a penalty starting at $2,000 a worker beginning in 2014. Last year, the administration delayed the requirement for the first time by moving it to 2015.

The new rules for companies with 50 to 99 workers would cover about 2% of all U.S. businesses, which include 7% of workers, or 7.9 million people, according to 2011 Census figures compiled by the Small Business Administration. The rules for companies with 100 or more workers affect another 2% of businesses, which employ more than 74 million people.

You’ll look in vain in either Sec. 4980H, the “shared responsibility” tax code section, or Sec. 1513 of the Affordable Care Act, which enacted 4980H, for anything that says the provision can take effect later than 2014.  Once again the administration is making it up as it goes in a tacit admission that Obamacare is a half-baked mess.  I hope somebody with 100 employees sues the IRS on equal-protection grounds to enjoin this politically-motivated selective enforcement.   To me it’s another clue that the individual mandate will also be delayed, and ultimately abandoned.

Paul Neiffer, Some ACA Relief for Employers with 50 to 99 Employees

Jason Dinesen, The Affordable Care Act and Small Businesses   

Martin Sullivan, Forget Obamacare for a Minute. Here’s Some Good News About Health Policy (Tax Analysts Blog).  

 

Via Wikipedia

Via Wikipedia

New filing season, same old scams.  Our area IRS Taxpayer Liason says this email is circulating:

Dear Applicant,

An Income Tax repayment is a refund of tax that you’ve overpaid.
Internal Revenue Service  ( IRS ) has received new information about your taxable
income you’ve overpaid too much tax through your job or pension in previous years.

There was a mistake with your tax, which an error occurred on your tax return,
and therefore your income reduced. Your employer also used the wrong tax code.

You are eligible to receive a refund of $2670.48 USD as your recent tax refund.
IRS will send you a repayment. You’ll get the repayment either by cheque in the post or by bank transfer.

Please click here to get your tax refund on your Visa or Mastercard now.

Note : Your refund can be delayed for a variety of reasons. For example submitting
invalid records or applying after the deadline.

Best Wishes,

IRS Tax Refund Service Team
Internal Revenue Service.

Of course it is a scam.  Some obvious clues: a real IRS notice doesn’t have to tell you that it’s dealing in “USD.”  We say “checks” in the US; you get “cheques” in Canada, the UK, or other old Commonwealth countries.  IRS doesn’t do refunds on credit cards.  And, of course, the most important clue:  the IRS will never initiate contact you with an e-mail or phone call.  If an email says it’s from the IRS, it’s not.

 

TaxGrrrl, Understanding Your Tax Forms: The W-2   

 

haroldHooray for Hollywood!  Movie Producer Peter Hoffman Charged With Film Tax Credit Fraud.  It involves Louisiana, which continues its co-dependent relationship with Hollywood with film tax subsidies.  Iowa, sadder but wiser, now prefers producer room and board subsidies to Film Tax Credits.

 

Howard Gleckman, Incoming Senate Finance Chair Wyden Outlines His Tax Agenda (TaxVox):

Speaking in Los Angeles to a conference sponsored jointly by the USC Gould School of Law and the Tax Policy Center, Wyden framed his tax agenda around several key issues:

Narrow the gap between taxation of investment income and ordinary income.

Significantly increase the standard deduction.

Simplify and enhance the refundable Child Tax Credit and Earned Income Tax Credit.

Revise savings incentives by creating a new investment account for all Americans at birth, shift savings subsidies from high-income taxpayers to low- and moderate-income households, and consolidate and simplify the current tangle of existing tax-preferred savings incentives.

Enhance job training.

Restore Build America Bonds—a short-lived idea that partially replaced tax-exempt state and local bonds with direct federal subsidies. He’d also seek ways to encourage business to funnel overseas earnings into domestic infrastructure investment.

It’s a disappointing agenda from somebody considered a thoughtful center-left voice on tax policy.   Any tax on investment income is best understood as a double-tax, and I don’t think by “narrowing the gap” he means lowering ordinary inocme rates.  His second, third and fourth points are fine, but the “Enhance job training” and “Build America Bond” proposals are just political pinatas to be broken open by insiders.  If you want to see what jobs training dollars really accomplish, I refer you to Iowa’s own CIETC.

 

TaxProf, The IRS Scandal, Day 278

checkboxJeremy Scott, Check the Box for Tax Avoidance (Tax Analysts Blog).  

The check-the-box rules allowed multinationals to create entities that were treated one way in a foreign jurisdiction and another by the United States. These entities, so-called hybrids, are at the core of companies like Apple’s tax strategies, and they have been used to bring about obscenely low effective tax rates (2.3 percent on $700 billion in foreign earnings, according to the Obama administration).

I think any corporate above zero is obscenely high.

 

Kyle Pomerleau, Proposal to Exempt Olympians’ Prize Money from Taxation: Good Politics, Wrong Solution (Tax Policy Blog)

Kay Bell, IRS takes a bite out of U.S. Olympic medalists’ winnings

 

Keith Fogg, Holding People Hostage for the Payment of Tax – Writ Ne Exeat Republica (Procedurally Taxing). No, he’s not talking about tax season.

 

News from the Profession: PwC Will Probably Be the First Accounting Firm to Replace Interns With Robots.  (Going Concern).  Makes sense, as they were the first to do so with partners.

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Tax Roundup, 2/7/14: Love it or leave it edition! And: Coralville tax scam.

Friday, February 7th, 2014 by Joe Kristan


20140207-1
Making America a better place to leave.  
2013 Expatriations Increase by 221% (Andrew Mitchel):

We do not believe that the primary reason for the increase in expatriations is for political purposes or for individuals to reduce taxes.  Instead, we believe that there are likely three principal reasons for the recent increases in the number of expatriations:

  1. Increased awareness of the obligation to file U.S. tax returns by U.S. citizens and U.S. tax residents living outside the U.S.;
  2. The ever-increasing burden of complying with U.S. tax laws; and
  3. The fear generated by the potentially bankrupting penalties for failure to file U.S. tax returns when an individual holds substantial non-U.S. assets.

The increase in expatriations may also be partly due to a 2008 change in the expatriation rules.

When a foot-fault can break you, you might not want to play the game anymore.  When they start shooting you for jaywalking, you might not want to be on that street at all.

 

20140106-1It’s never too cold for a tax scam.  From CBS2Iowa.com:

Coralville police say they’re receiving more reports of a telephone tax scam. CBS 2 News first told you about the scam last month. The IRS says the scam targets taxpayers, especially recent immigrants. A caller claims to be an IRS agent and says the victim owes money. The victim is told to repay the money using a preloaded debit card or a wire transfer. If the victim refuses, the caller threatens to arrest or deport them or suspend his or her drivers license. The scammer uses a fake name and fake IRS badge number. The caller has found a way to make caller IDs show the number as the IRS toll-free line. To appear more legitimate, the scammer may also send a fake email or recite part of the victim’s social security number. After threatening the victim, the caller may hang up. A second scammer may later call the victim, pretending to be from the local police department or DMV.

It sounds like the scam described in this IRS web page.  If they haven’t sent you a letter first, the IRS isn’t going to call you.  Nor will they contact you via e-mail.  The IRS gives this advice:

  • If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.
  • If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.
  • If you’ve been targeted by this scam, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov.  Please add “IRS Telephone Scam” to the comments of your complaint.

Paying taxes you actually owe is enough fun without sending extra to scammers.

 

20121120-2

Fiduciary Income Tax Blog, 65-Day Rule — 2014:

Fiduciaries of estates and complex trusts have the option to treat certain distributions as having occurred last year. An election can be made with respect to distributions made within 65 days after the end of a tax year. The 65th day of 2014 is Thursday, March 6.

Think of it as a trust mulligan.  With the 3.8% Obamacare Net Investment Income Tax applying at around $12,000 of trust income, many trusts will want to use the 65-day rule to get the income to beneficiaries whose income is under the thresholds.

 

William Perez, Understanding Personal Exemptions

Jason Dinesen, Financing a Small Business: 4 Items to Remember.  “Don’t spend money just to get tax deductions.”

Kay Bell, Federal itemized deduction claims state-by-state

TaxGrrrl, Looking For Your Tax Refund? What You Need To Know So Far For 2014 

 

This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

Christopher Bergin, New IRS Commissioner Wants to Move Forward – We Should Let Him (Tax Analysts Blog):

Koskinen needs the time and space to do what everybody agrees must be done: Fix the IRS. The investigations must continue. But the new commissioner needs to move forward as well. That means not avoiding the problems, but going at them in a positive, not in a negative way. That’s what good leaders do. We should give the man a chance to show us he is one.

He could hardly be worse than the last one.

Howard Gleckman, Individual Income Taxes May Soon Generate Half of All Federal Tax Revenue (TaxVox)

CBO explains much of the rise in individual income taxes by expected increases in real incomes produced by a recovering economy, including higher wages, salaries, capital gains, and income to owners of pass-through firms, who report their taxes on their individual returns. CBO also expects a significant increase in distributions from retirement accounts for at least the next few years, driven in part by higher asset values.

Two other reasons: Higher tax rates for upper-income households (including the surtax in the Affordable Care Act) and the phenomenon known as real bracket creep. Tax brackets are adjusted for inflation but not economic growth. For at least the next few years, CBO figures incomes will grow faster than those inflation-adjusted brackets.

Oddly, these projections assume the expiring provisions actually expire.  Not likely.

Joseph Henchman, Response to Jesse Myerson’s Land Tax Idea (Tax Policy Blog).  Nice effort, but I’m not sure you need to respond to somebody who says Communism gets a bad rap.

TaxProf, The IRS Scandal, Day 274

Jack Townsend, Another Swiss Bank Enabler Indicted in SDNY

J. Richard Harvey, Jr., Surprising Statistics on Corporate Disclosures of Uncertain Tax Positions (UTP) (Procedurally Taxing):

 

The Critical Question: Does the NFL Need a Billion Dollar Subsidy Annually from Taxpayers? (Tax Justice Blog)

Career Corner.  Protip to Government Accountants: If You’re Into Kiddie Porn, You Probably Shouldn’t Watch It At Work (Going Concern)

 

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Tax Roundup, 7/12/13: We get scam email. And flappers!

Friday, July 12th, 2013 by Joe Kristan

Don’t be stupid.  Yes, you hardly need to consult your CPA for that advice, but I think of it every time I get spam email like this:

20130712-1

Somewhere I read that email scammers make their pitches stupid on purpose to identify the dumbest marks, as they are easiest to fleece.  This one certainly does so.  Some signs of stupid:

  • The email address: smoggiest@HELP.STATE.TX.US.GOV.    Come on.
  • The salutation:  “Dear Accountant Officer.”  It sounds like it’s addressing somebody who issues parking tickets to CPAs.
  • The English of someone not brought up speaking English: “Hereby you are notified…”
  • The use of “please” by a revenue agency.  Please…

Folks, the IRS and state taxing agencies don’t send notices like this via email.  When you get one, delete it — and never click the links.

 

TaxProf, The IRS Scandal, Day 64

Janet Novack, 4 Steps To Take Now That Stretch IRAs Are Endangered:

But the new stretch IRA limits, which Finance Committee Chairman Max Baucus (D-Mont.)  first floated in the Senate last year, would require most retirement accounts inherited by anyone other than a spouse to be distributed (and in the case of non-Roth accounts taxed) within five years of the owner’s death…

The limit on stretch IRAs, which also appeared in President Obama’s most recent budget proposals, would raise $4.6 billion over 10 years, Congress’ Joint Committee on Taxation estimates.  

Janet explains how this possibility can affect your thinking about beneficiary designations and Roth conversions, among other things.

 

Christopher Bergin, Jaws (Tax Analysts Blog):

Clearly, the IRS did some inappropriate things in handling the applications for exemption for tea-party groups and others. But I would prefer to have congressional committees working on making sure our tax agency operates fairly and efficiently rather than going on witch-hunts.

Christopher is right, and as a practitioner I don’t want to see tax adminstration get any worse.   Still, you can’t ignore the long-term benefit for punishing bureaucratic misbehavior.  It would require a suicidal level of tolerance for GOP legislators to let bygones be bygones after the outrageous behavior of the IRS in the Tea Party scandal.  Maybe some budget haircut is needed to make the IRS less eager to take sides next election.

 

Howard Gleckman,  How Not to Fix the IRS:
Forgive me, but let’s try to apply a dash of common sense to the agency’s problems. After months of looking, the IRS’ most vocal critics have found no evidence that its poor processing of requests by political organizations seeking tax-exempt status was politically-motivated.
It was, however, real. And its cause seems to be a staff that suffered from low skills, poor training, low morale, a shortage of resources, and bad management. It is hard to see how cutting an organization’s budget by one-third will fix any of these problems.

Saying that it wasn’t politically-motivated over and over doesn’t make it so.  As the Treasury Inspector General has reaffirmed, the IRS treated right-side outfits far worse than left-side outfits.  That doesn’t just happen — the thing speaks for itself.   And considering Lois Lerner’s partisan past with the Federal Election Commission, the circumstantial evidence of bias is overwhelming.  The “overworked and underfunded” defense of IRS behavior doesn’t fit these facts.

Still, it would be nice if Congress would use its funding power carefully to punish bad behavior, rather than as a meataxe that will harm innocent taxpayers as much as guilty bureaucrats.

 

Kay Bell, States could get more money by modernizing sales tax laws

Brian Mahany, TICs and REITS – “Accidents Waiting To Happen”  Many REITs are perfectly good investments.  I like them myself.  But illiquid ones can lock up your money while generating big liquid fees to a broker.

Tax Justice Blog, Undocumented Immigrants Pay Taxes, and Will Pay More Under Immigration

TaxGrrrl, Parents Sue School For Art Auction Gone Bad.  Some parents apparently shouldn’t be allowed to run around loose.

 

There’s a new Cavalcade of Risk up at Workerscompensation.com! Don’t miss Hank Stern’s Hunger Games and the MVNHS©, about ingenious health care cost savings innovations across the pond.

Via Wikipedia

Via Wikipedia

Robert D. Flach has your Friday Buzz ready!

Great Grandpa knew this.  Not all flappers are created equal (Rob Smith, IowaBiz.com)

The Critical Question: Is Diet Soda Worse than Regular Soda? (Scott Drenkard, Tax Policy Blog)

 

 

Friday workplace fun.  Let’s Discuss: Big 4 Bullies (Going Concern):

Probably the most irritating thing, according to this study, is that these people get ahead. We’ve all seen it.

That’s about how I remember it.  They rarely get the comeuppance they deserve, but when they do, it’s awesome.

 

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Tax Roundup, 1/31/2013: Happy IRA mulligan day! And on brief, the Tax Update!

Thursday, January 31st, 2013 by Joe Kristan

20111109-1Today is the last day to make a charitable IRA rollover for 2012.  Yes, 2012 is over, but taxpayers who are required to make IRA minimum annual distributions may still have one 2012 transaction left in them.

Taxpayers who are born before July 1, 1942 who took cash from an IRA in December 2012 can contribute up to $100,000 to a charity today and have it excluded from their 2012 income.

- Taxpayers who have failed to take their required minimum 2012 distribution can avoid the 50% penalty for failing to take their distribution by arranging for the IRA to transfer the minimum amount, up to $100,000, to a charity today.

These opportunities are part of the retroactive extension of the rule allowing up to $100,000 to be transferred from an IRA directly to a charity without including the amount in the IRA owner’s income.  This avoids the 50% of AGI charitable contribution limit.  It also avoids other potentially unpleasant consequences of having the IRA income above-the-line, like making your Social Security taxable.

 

On brief, the Tax Update Blog.  The Institute for Justice, the victorious legal team behind the shutdown of the preparer regulation program, has filed a brief opposing a stay in the injunction against the program.  Making their case airtight, they cite the Tax Update, along with tax bloggers Kelly Phillips Erb (TaxGrrrl), Robert D. Flach  and Jason Dinesen.  From Footnote 18 of the brief:

For an example of the disruption routinely caused by the IRS’s misadministration of the RTRP regulations, see Alban Decl., Ex. 3 (the comments from preparers are illustrative and reference previous examples of similar disruptions); see also Joe Kristan, IRS quietly delays CPE requirement under new preparer regulation scheme , Tax Update Blog (January 8, 2013), http://rothcpa.com/2013/01/irs-quietly-delays-cpe-requirement-under-new-preparer-regulationscheme/ (describing IRS message as “a quiet admission of failure”).

With the Tax Update Blog on their side, who can be against them?

 

What does a poor college student have that could be lucrative to a thief? A Social Security number.  From the Memphis Business Journal:

With tax season bearing down, the IRS has a warning about a new refund scam aimed at college students, seniors and church members.

The Internal Revenue Service said Tuesday the scam tries to get students to give their personal identification and file tax returns claiming fraudulent refunds. It has sent misleading and bogus refund claims using the American Opportunity Education Tax Credit on college campuses throughout the Southeast.

Be very cautious about giving anybody but your employer, your bank, a medical provider or the IRS your Social Security number.  And never give it to a scammer.

 

David Brunori, Stifling Lefty — Political Correctness in the Tax Debates (Tax.com):

So the pro tax people managed to shut Mickelson up. Rather than engaging  in a discussion about why it is okay to take his money, they stifled him.

Shut up, they explained.

 

Paul Neiffer points out that now that penalties are waived for farmers who file after March 1, they may not want to file by their usual deadline:  File Your Return After March 1 Not Before!

 

Have you mailed your 1099s and W-2s?  Today is the deadline for sending them to recipients.  Russ Fox has the scoop.

TaxGrrrl, Ask the taxgirl: Tax ID Numbers and 1099s

Kay Bell,  Tax e-filing and Free File is now available for most taxpayers

Trish McIntire,  Freebies.  Don’t ask for them.

Chris Sanchirico,  Camp’s Investment Tax Plan: Implications for Lower Rates on Capital Gains? (TaxVox)

Tax Foundation, New Report: Cell Phone Taxes Exceed 20% in Several States

Margaret Van Houten and Jodie Clark McDougal,  Iowa Trust Industry Breathes a Sigh of Relief after the Supreme Court’s Reversal in Trimble

Cara Griffith, Kentucky DOR’s Disregard of Transparency (Tax.com)

Jack Townsend,  Another UBS Depositor Pleads

Patrick Temple-West,  India sees end to Vodafone tax dispute, and more

 

News you can use. IRS: No One Is Too Old, Too Poor Or Too Sympathetic To Avoid Prosecution  (Brian Mahany)

How to catch a dinosaur.  Not Income Tax Evasion – Structuring – That’s How They Got Kent Hovind (Peter Reilly)

Robert D. Flach goes into blog hibernation for the remainder of tax season:  SO LONG, FAREWELL, AUF WIEDERSEHEN, GOOD NIGHT!

These are a few of my favorite things…  Guns and Tax Returns. (Christopher Bergin, Tax.com).

 

Today’s morale builder: Les Misérables-Inspired Video Reminds You That Busy Season Kills Your Dreams (Going Concern)

 

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Tax Roundup, 8/29/2012: Envision an IRS exam. Also, weathering storms, and more!

Wednesday, August 29th, 2012 by Joe Kristan

Sometimes a “visionary” is just seeing things.  The Department of Justice yesterday announced that a “visionary” tax advisor has been enjoined from giving any more tax advice.  From the Department of Justice press release:

The civil injunction order against Scott A. Waage, of San Diego, was signed by Judge William Q. Hayes of the U.S. District Court for the Southern District of California. Waage agreed to the injunction without admitting the allegations against him. 

The government  complaint  in the case alleged that Waage, a self-proclaimed “visionary tax attorney,” promoted tax fraud schemes that helped customers evade income taxes through a concept he called “Strategic Integrated Planning.” According to the complaint, one of Waage’s schemes involved creating and using sham consulting corporations (purportedly headquartered in customers’ homes) that did not perform consulting services. Customers funneled funds to the sham companies to pay for and improperly deduct the customers’ personal expenses, the complaint alleged.  

They must have lowered the bar for what is “visionary.”  Using phony businesses to try to deduct personal expenses isn’t exactly the cutting edge of tax chiseling.

The injunction order requires Waage to give the government a list of all clients who used his tax planning or tax preparation services since 2001. Waage also must send his former clients notice of the injunction order.

That’s the problem when you use a “visionary” tax preparer who is willing to take “aggressive” positions that your everyday namby-pamby practitioner like me won’t touch.  When the preparer gets in trouble because he confuses “aggressive” with “absurd,” his clients can expect the IRS to take a close look at everyone on the client list.

 

“When the Storm is Over,” by Newgrass Revival

Kay Bell, When the storm’s over, don’t forget to claim possible tax help for your losses

Trish McIntire, Disaster Preparedness and Response

Jim Maule, More on Income Averaging:

 The special income averaging for farm and fishing income is available regardless of the economic status of the taxpayer. In the meantime, the taxpayer in Francis v. Comr., T.C. Summ. Op. 2012-7, a member of the Armed Forces not counted among the ranks of the wealthy, is stuck with a disappointing tax outcome caused by circumstances beyond his control. Why the better tax treatment for farming and fishing income and not for military back pay? Something about this nation’s tax priorities isn’t right, but those who pay attention have known that for a long time.

But weep for the farmers.  2012 US Net Farm Income At a New Record Even With The Drought! (Paul Neiffer)

Why You Need a Will (Missouri Tax Guy)

Tax headaches if money-market funds are allowed to break the buck? Floating NAVs could prove taxing (Robert N. Gordon)

Linda Beale,  Tax Extenders:  where the Senate stands.

Howard Gleckman,  Should Congress Curb Tax-Exempt Municipal Bonds?  (TaxVox)

Shock! Media Leaves Out Key Things in Covering Poll Showing Support for Taxing Rich (Joseph Henchman).  “Support for increasing taxes on the rich has been dropping over time, not increasing.”

Daniel Shaviro,  Why didn’t the IRS and Treasury do more about aggressive tax planning techniques of the sort that Romney appears to have used extensively?  Because they were legal, maybe?

It’s Wednesday, so it’s a Buzz Day for Robert D. Flach.

Anthony Nitti,  Blog Author Makes Appearance in Taxes Magazine; Though Regrettably, Not the Swimsuit Issue.  No disrespect, but I don’t regret for a moment that “Taxes” lacks a swimsuit issue.  There are vanishingly few practitioners you’d want to see that way.

News you can use: Look, It’s Okay, The Big 4 Doesn’t Want You (Going Concern)

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Tax Roundup, 7/25/2012: Thrifty thief sentenced; trashy trusts; fleeing France

Wednesday, July 25th, 2012 by Joe Kristan

Thrifty thief gets 5 1/2 years.  The woman who got a fraudulent $2.1 million tax refund from Oregon and who subsequently went on the thriftiest spending spree ever was sentenced yesterday to 5 1/2 years behind bars.  From the Huffington Post:

Before her June 6 arrest, Reyes’ spending spree included about $1,800 in cash to buy a 1999 Dodge Caravan and spending $851 on tires and wheels.

She did allow herself a few little luxuries, too:

The affidavit says other purchases included a queen-sized air mattress, a deep fryer, an air conditioner and a cream and gray floral rug. She bought a sofa and recliner with brown leather trim.

Sadly, she was more careful with the money than the state was:

The return was set aside for review by processing staff and managers for potential fraud. But “some time later,” the affidavit said, a Revenue employee overrode the flagged payment and the refund was issued.

By policy, three agency employees are required to verify the override, the newspaper said. However, according to the affidavit, no one responsible for reviewing the return opened the file to look at it or looked at the W-2 form Reyes filed.

Call me when the state fills out its vehicle fleet with 12-year old used cars.

 In Sod We Trust.  From ArgusLeader.com:

The owner of a Sioux Falls sod business ducked taxes for almost 10 years before investigators caught on to the trust fund scheme he had used to evade capture, federal prosecutors said.

Jerome Adrian, 70, was arrested and appeared Friday in U.S. District Court in South Dakota on one count of conspiracy to defraud the United States, 12 counts of willful failure to collect or pay over tax, two counts of evasion of payment, five counts of tax evasion, four counts of willful failure to file tax returns, and one count of false tax refund.

Bogus trusts are an IRS “Dirty Dozen” tax scam.  They don’t work, though they might seem like they do until you get caughtRuss Fox has more.

Congress is pretending to address Taxmageddon, the expiration of the Bush-Obama era tax cuts at the end of the year.  Coverage includes Anthony Nitti’s Republicans Propose Their Own Way of Dealing With the Bush Tax Cuts, Kay Bell’s Republican definition of ‘temporary’ tax breaks depends on your income bracket, and Howard Gleckman’s Senate Democrats Would Keep Dividend Taxes Low, But Why?

“Tax Fairness” advocates, like the President and Citizens for Tax Justice, seem to think that there can never be bad consequences for jacking up taxes on “the rich.”  France is about to give a lab test on such ideas, including a 75% rate on income exceeding €1 million.  Veronique de Rugy, a newly-naturalized U.S. citizen who got out of France while the getting was good, explains the Consequences of High Taxes: French Edition.

Surprise! IRS Audits of S Corporation Returns: No-Change Rate Remains High, TIGTA Finds. But there has to be a pony in there somewhere.

The Iowa Department of Revenue has issued its summary of 2012 lowa tax law changes.

I hate to disagree with anything in Peter Reilly’s space, but I can’t abide the notion that it is the fault of the taxpayers and their advisors that the IRS is valuing at $65 million an artwork that cannot legally be sold.  The artwork contains an American Eagle, the sale of which is subject to severe penalties.  But read “‘Canyon’ Controversy – Blame The Advisers Not The IRS,” a guest piece in Peter’s space by Matthew Erskine, and decide for yourself.

Robert D. Flach has a new “Buzz” roundup of tax news.

Jason Dinesen: Same-Sex Marriage, Community Property, and Self-Employment Earnings

Jim Maule concludes a riveting 14-part series on the idea of having the IRS prepare returns for individuals using third party information reporting.

Where to start? What is Wrong with the Press? (David Brunori,Tax.com).

 

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Tax Roundup, 7/23/2012: Chasing smokestacks, catching smoke. Also: final film credit trial starts; 1040s and summer homes.

Monday, July 23rd, 2012 by Joe Kristan

So the guy who swindled customers in his commodity brokerage in Cedar Falls also swindled Iowa “economic development” smokestack chasers.  From QCTimes.com and AP (via State 29):

Even before its dramatic collapse last week, an Iowa-based brokerage implicated in a $200 million fraud scandal had defaulted on the terms of a $1.24 million state incentives package that helped the firm build a state-of-the-art headquarters, newly released records show.

The Iowa Economic Development Authority warned Peregrine Financial Group, Inc. in March that it had violated its contract by paying employees lower salaries than promised and must pay back some of its aid immediately, according to a letter released in response to a request from The Associated Press.

It’s yet more evidence for what I’ve long said about “economic development incentives”:

When Iowa tries to pay other businesses to come here, it’s like a guy who brings his wife’s purse into a bar to buy drinks for the girls. The girls aren’t impressed, and any he does pick up aren’t worth much.

That’s something Iowa should ponder before it signs the check to bribe a fertilizer plant to locate in Iowa with tax money paid in part by competing fertilizer plants that are already here.

Who pays the bills? The Tax Foundation has a map showing the Percentage of Federal Income Tax Revenue from Filers Making Over $200,000:

Airball. The former owner of a Kansas City minor league basketball team will go away for 51 months for crimes that included not remitting payroll tax withholidngs, reports CJOnline.com:

James Clark, 53, of Overland Park, a former owner of the Kansas City Knights basketball team, pleaded guilty to one count of tax fraud and one count of bank fraud. Clark admitted that he withheld payroll taxes from employees of his company, SWISH Holding Corp., while failing to pay more than $502,000 to the Internal Revenue Service. He diverted the funds and used them for his own purposes, including the operation of the basketball franchise.

Many people think that they are just “borrowing” money when they fail to remit withheld taxes.  It can be tempting when suppliers are howling for cash.  This case shows that failure to remit withholdings can have consequences much more serious than cash late penalties and interest.

 The last scheduled trial of an Iowa film tax credit fiasco figure is slated  to start today.  Chad Witter, an accountant who worked as a middleman in obtaining and marketing film credits, will go on trial in Polk County District Court on charges of theft, fraudulent practice and ongoing criminal conduct.  Dennis Brouse, a producer who worked with Mr. Witter, was sentened to ten years in prison earlier this year on charges arising out of the disastrous program to bribe filmmakers to come to Iowa with transferable tax credits.

How Government Limits Upward Mobility (Howard Gleckman, TaxVox):

True, social welfare programs provide a valuable safety net for the very poor. For instance, the Earned Income Tax Credit and the Child Tax Credit are important income supports for low-income families.

But because these safety net programs phase out as incomes rise, some people face marginal tax rates as high as 80 percent for getting a better job or even a raise.  A new Urban Institute calculator shows how this works.

Related:  Taxing the heck out of the top 400 taxpayers won’t help the bottom 20 million

Will your 1040 help pay for your vacation home? My latest post at Iowabiz.com, the Des Moines Business Record group blog for entrepreneurs.

WSJ: IRS Audit of Romney Donor Raises Questions About Presidential Enemies List (TaxProf Blog)

Jana Luttenegger, Summer Camp Tax Credits (DavisBrown Law Firm Tax Blog)

Or somewhere darker: The IRS Art Advisory Panel Has Its Head In The Clouds (Janet Novack)

Kay Bell, Bicycling commuters, you might qualify for a tax-free workplace benefit

Russ Fox, Two Sets of Books Aren’t Better than One.  At least when  one set doesn’t include the skimmed receipts.

Jason Dinesen, Medicare Part B and Same-Sex Married Couples

Jack Townsend, Form 8938 Resource

Peter Reilly wades into the swamp of the tax treatment of Scientology.

TaxGrrrl, Saban Suggests Penn State Tickets Should Be Taxed To Pay For Scandal.  I read that as “Satan” at first.

News you can use: The General Crapiness of Your Life Does Not Relieve You of Your Tax Obligations (Anthony Nitti)

Robert D. Flach will save $11,000 in taxes annually by fleeing New JerseyHe’s getting paid to do something most of us would be happy to do for free.

Help Wanted: The Hunt for a New Going Concern Freelancer Goes OnIf you have a Big 4 bad attitude, what are you waiting for?

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There’s no Tax Fairy in California

Wednesday, March 21st, 2012 by Joe Kristan

A lot of folks are convinced deep down that they are chumps for paying taxes.  They think that there are people out there who have figured out how to get out of paying taxes legally, or at least safely.  Take this Sioux City man who whose story is told in the North Platte Bulletin:

Insurance agent Patrick L. Bohall of Sioux City, Iowa, was sentenced Monday in United States District Court in Omaha for federal tax evasion…

Bohall is an insurance agent whose business, Legacy Financial Services, is located in South Sioux City, Neb.

Bohall told his tax preparer in 2001 that he was paying too much in taxes and had joined in a plan to learn how to not pay taxes. He was advised by his tax preparer that he had to pay taxes.

Bohall’s 2003 return was prepared in California and contained false statements that erased his taxable income. Bohall did not file any returns or report any income for he 2004-06 tax years.

And who was that miracle California preparer? According to the plea deal, none other than our old friend Joseph Saladino, who first came to our attention in 2005 when he was enjoined from a tax scam promotion.  His web site featured this graphic:

fandp.jpg

Mr. Bohall will be doing without that stuff for about six months.

The Moral?  There is no Tax Fairy, not even in California.  If you have enough income from a job or business to reach taxable levels of income, and you lack the lobbyists to give you special exemptions or tax credits, you will have to pay income tax.  And you don’t have to feel like a chump when you do.

Link: Indictment

Related:

Nope, still no tax fairy

The truth about the Tax Fairy

Buy.com founder learns the truth about the Tax Fairy

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You get what you pay for, refundable tax credit edition

Monday, February 27th, 2012 by Joe Kristan

Refundable credits give rise to fraud schemes like day follows night. When you can get a check just for making up numbers and sending a form in, that’s irresistable to scammers. A plea agreement in an Iowa case shows how it’s done; The Des Moines Register reports:

Records show Denise Brown, whose age and hometown were not available, signed a plea agreement last week acknowledging she made false statements to an Internal Revenue Service investigator in 2010 and committed perjury in front of a grand jury.

On her own tax returns for 2009, Bailey falsely claimed she had personal income for operating an

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You can’t buy discount research credits on the internet…

Thursday, December 29th, 2011 by Joe Kristan

…but that didn’t keep an Orange County, California man from trying to sell them. Yesterday the Department of Justice announced:

A federal court in Los Angeles has permanently barred Lamar Ellis of Brea, Calif., from promoting a scheme involving sales of bogus federal tax credits, the Justice Department announced today. According to the government

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Awfully nice of her to take all of that burden on herself

Monday, December 19th, 2011 by Joe Kristan

Russ Fox reports on the work of a real humanitarian:

I

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Massachusetts follows where Iowa leads

Tuesday, December 13th, 2011 by Joe Kristan

Iowa shows the way in enabling film tax scams, but now Massachusetts is catching up. The Hollywood Reporter says a director has been charged with scamming the Bay State’s film tax credit program. The scam purportedly used the same tools used in scamming the Iowa program: inflating film expenditures to fraudulently obtain tax credits, which could then be sold for cash. From the report:

The first four charges could carry prison sentences of up to five years. The three tax related charges could lead to prison terms of three years for each. Adams would also likely be forced to make restitution of at least $3.6 million of the $4.7 million in tax credits he has already received, which represents the amount the authorities believe was false.

Among the items they allege was false was a claim that actor Richard Dreyfuss was paid $2.5 million for Lightkeepers, when in fact (per their investigation) he was paid only $400.000.

Of course the film office enablers are undaunted:

Lisa Trout, head of the Massachusetts state film office, said as far as she knows this is the first such case involving an alleged fraud in the program. She said the program has been successful for the state and is funded to continue through 2022.

Successful? The Massachusetts Department of Revenue isn’t so sure, reports the Tax Policy Blog:

A new report on film industry tax incentives, conducted by the Massachusetts Department of Revenue, was released this month. The report finds that the state’s $82 million film tax credit program generated $10 million in new state tax revenue in 2009. That is equal to about 13 cents of incoming tax revenue per dollar of tax credit awarded, an unimpressive number which even includes tax revenue gained from the increased economic activity as money spent by the film makers makes its way through the local economy (known as the “multiplier effect”).
The report also finds that the credits brought 222 net jobs for Massachusetts residents in 2009, at a cost of nearly $325,000 per in-state job.

At least Iowa wised up and stopped the film gravy train. Massachusetts is sadder, but as yet no wiser.

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You mean I don’t have $630,000 in a secret government account hidden from me by the Cabal?

Monday, December 12th, 2011 by Joe Kristan

Sorry. My new post at the newly-renovated Going Concern.

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Saints win on the field, but lose in the film business

Thursday, October 6th, 2011 by Joe Kristan

It looks like the New Orleans Saints football team had the same sort of luck with film tax credits as the State of Iowa. From NOLA.com:

Wayne Read, who hoodwinked more than two dozen members of the New Orleans Saints organization out of nearly $1.9 million by selling them bogus film tax credits, was sentenced Wednesday to four years in federal prison.

That’s different from Iowa, where the taxpayers, rather than the credit buyers,were the fraud victims.

Read, the former chief executive of Louisiana Film Studios LLC, told The Times-Picayune in 2009 that he spent the Saints’ money on studio rent and development. But he never applied for the credits from the state, and the film studio project ended in bankruptcy.
Several other players blame former Saints long snapper Kevin Houser, who is also in the securities business, for the bad deal. One lawsuit alleges that Houser paid the money for tax credits directly to Read instead of using the money to obtain “shares of stock, membership units, or promissory note establishing the nature and terms of the ‘investment.'”

The moral? Whether the film tax credits are being peddled by the long snapper or Hollywood, somebody is getting robbed.

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In Kansas City, a bad situation gets worse.

Friday, September 23rd, 2011 by Joe Kristan

No, this isn’t about the Chiefs.
As bad as being barred from tax practice can be, federal felony indictments are far worse, as a Kansas City minister with karate and tax sidelines might attest.
Last March Gerald A. Poynter II, operating as “Jerry Love Ministries,” was barred from promoting a “redemption” scheme that claimed tax refunds based on the (absurd) notion that the government is sitting on big pots of money for all of us, there for the asking.
Mr. Poynter now has much more serious problems. He has been indicted as the central figure of a fraudulent tax refund scheme. From a Department of Justice press release:

Poynter, the leader of the conspiracy, allegedly recruited

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Well, Mr. IRS Agent, I could explain my tax return to you, but then I’d have to kill you.

Tuesday, September 13th, 2011 by Joe Kristan

A pair of “professional astrologers” in California was enjoined last week from setting up sham trusts to conceal taxable income. That stuff doesn’t work, of course, but I liked this wrinkle:

The pair is accused of having clients sign an “Oath of Privacy,” with penalties of $100,000, as a way to ” ‘silence’ their customers from disclosing information to entities like the IRS,” according to the lawsuit.

It’s one of the mysteries of the tax world that people will buy tax planning that only works if the IRS never finds out about it. If the stuff really works legally, then it should be no problem if the IRS knows about it, because they can’t touch you for doing something legal. If you have to keep it a secret, that’s a pretty good sign that it doesn’t really work.

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Goat trial begins today

Monday, August 15th, 2011 by Joe Kristan

The centerpiece criminal trial in the Iowa film tax credit fiasco gets underway in Des Moines today. Former Iowa Film Office Director Tom Wheeler faces felony misconduct in office charges for his role in the disastrous program.
For Mr. Wheeler, the trial will be a harrowing experience, but for the rest of us, it promises comedy gold. The prosecution will try to lay the blame for this multi-million dollar disaster at Mr. Wheeler’s feet. The defense will try to spread the blame around state government like a rogue honey wagon. His superiors at the Department of Economic Development will get splattered, certainly, but the manure hose will also be pointed at the Department of Revenue. From the Des Moines Register:

For example, Wheeler said, emails in his trial will show he sought guidance on various expenditures from the state Department of Revenue, including in-kind, deferred or sponsorship transactions in which no cash changed hands. Many industry experts later said such transactions should not have qualified.


Flickr image courtesy carlfbagge under Creative Commons license.
These money-for-nothing deals led to the issuance of millions of dollars of transferable tax credits by the Department.
The State Auditor’s report outlining the disastrous administration of the program shows that Mr. Wheeler has plenty to answer for. But felonies? The trial looks like an effort to blame the fiasco on one inept bureaucrat. Whatever Mr. Wheeler’s failings, he had a supervisor. He was appointed by a Governor, and his program was authorized by an almost unanimous Iowa General Assembly. None of these people face criminal charges, yet they bear the ultimate responsibility for the disaster. If bureaucratic ineptitude is a crime, they should just lock the state office buildings from the outside at night.
Other coverage: AP story
Tax Update film credit coverage:
Sharks circle goat
Iowa Film Follies: Harold Hill meets The Pussycat Dolls
Ten years for filmmaker Runge
Let them eat canapes
Complete Tax Update film credit coverage

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Iowa film credit program has only $20 million of bleeding left to do

Wednesday, August 10th, 2011 by Joe Kristan

EasternIowaGovernment.com reports that the Iowa’s remaining exposure to the disastrous Iowa Film Tax Credit program is down to $20 million. Before the program was shut down, it was estimated as high as $330 million.
The state has been negotiating settlements with film producers who lost their credits when the program collapsed. From the report:

The latest settlement was over $265,000 in state tax credits and nearly $60,000 in cash paid to the producers of a feature-length film called

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What happens if you click on an IRS phishing e-mail?

Monday, August 8th, 2011 by Joe Kristan

Nothing good:

Bearing the caption “Internal Revenue Service United States Department of the Treasury,” the malicious electronic mail tells the recipient that he has committed tax fraud. In this connection he should examine his tax statement by following a given web-link to the IRS site. But when the user follows the web-link, he’s prompted for taking down one newly launched LICAT variant, which Trend Micro identified as TSPY_ZBOT.WHZ.
Amazingly, similar to any LICAT sample, TSPY_ZBOT.WHZ produces Web-addresses with the help of a computation keeping the present date as base. It (the Trojan) links up with the Web-addresses so the configuration file associated with it can be downloaded. The file, reportedly, consists of information regarding the Internet sites which it’ll keep watch on along with the website onto which it’ll transmit all stolen info. What’s more, the malware as well seems like focusing on the standard activities of ZBot which include stealing of data as well as attempts at bypassing detection by anti-virus software.

Remember, the IRS will not send you email notifying you of an exam, return changes, refunds, or anything of the sort. The IRS does all of that by standard mail. Unless you have already been in contact with an IRS agent, and you are sure that an e-mail is from that agent, you should just delete any purported IRS e-mail without opening it.

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If the IRS sends you a notice via e-mail, the IRS didn’t send it.

Friday, June 17th, 2011 by Joe Kristan

A client forwards this e-mail:
20110617-1.jpg
Click image to enlarge
It’s a scam, of course. The IRS does not send notices via e-mail. If you have a refund coming, they’ll just send you a check. If you get anything like this, delete it, and don’t click any of the links; the link will either try to collect your bank information to loot your account, or it will dump a bunch of malware on your computer

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