Posts Tagged ‘tax crime’

Tax Roundup, 2/5/16: The IRS isn’t a bank, and a 1099 isn’t what makes income taxable. And: oil companies, money trees.

Friday, February 5th, 2016 by Joe Kristan

20151217-1Nice Try. The tax law discourages taxpayers from tapping retirement savings too early with a 10% early withdrawal tax. The tax law also allows an above-the-line deduction for penalties imposed by banks for closing out a CD or savings account before maturity.

They aren’t the same thing.

A Mr. Martin learned that lesson this week in Tax Court. He was 54 years old when he pulled out $55,976.29 from his IRA. He reported the 10% penalty tax, but then he also deducted it on line 30 of his 1040 as a “penalty on early withdrawal of savings.”

I can see the logic, as it does look like, well, a penalty on an early withdrawal of savings. But that’s not how the Tax Court sees it (my emphasis):

Martin argues that the additional tax imposed by section 72(t) is deductible under section 62(a)(9). We disagree. Section 62(a)(9) provides a deduction for an amount “forfeited to a bank, mutual savings bank, savings and loan association, building and loan association, cooperative bank or homestead association as a penalty for premature withdrawal of funds from a time savings account, certificate of deposit, or similar class of deposit.” The section 72(t) additional tax is payable to the federal government, not to a “bank” or similar institution listed in section 62(a)(9). Therefore, it is not deductible under section 62(a)(9). Further, the additional tax imposed by section 72(t) is a federal-income tax. Section 275(a)(1) disallows any deductions for “Federal income taxes” (A deduction for certain other taxes, including State income taxes and some other federal taxes, is allowed by section 164(a).).

There was one other problem with the return. He won $1,000 at a casino, an amount arguably below the threshold for which casinos most report gambling winnings on a W2-G. They reported it anyway. Again, the Tax Court:

The casino reported on an information return its $1,000 payment to Martin. Martin argues that, because he earned entries into the lottery by playing slot machines, his gambling winnings should be subject to the $1,200 reporting threshold. Thus, Martin argues, the casino should not have reported the gambling  winnings of $1,000 because the payment fell below the $1,200 reporting-requirement threshold for gambling winnings from slot machines.

Martin assumes that gambling winnings that are not reportable on information returns are not includible in gross income. At trial he said that the IRS is “trying to separate the taxation from the reporting when it is undeniably one and the same”. Martin does not see, or refuses to see, the distinction between information-reporting requirements and the imposition of income tax. Whether the casino was required to report Martin’s winnings is irrelevant to the question of whether his winnings are includible in his gross income. The Internal Revenue Code does not exclude a payment from income when the payment is not large enough to require the payor to report the payment on an information return.

A lot of people think that when something doesn’t show up on an information return, it’s tax-free. It just doesn’t work that way.

Cite: Martin, T.C. Memo. 2016-15

 

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Obama seeks oil tax, destruction of self-driving car industryCNBC reports:

President Barack Obama will propose a $10-per-barrel charge on oil to fund clean transportation projects as part of his final budget request next week, the White House said Thursday.

Oil companies would pay the fee, which would be gradually introduced over five years. The government would use the revenue to help fund high-speed railways, autonomous cars and other travel systems, aiming to reduce emissions from the nation’s transportation system.

“Oil companies would pay the fee.” Such a kidder, that President. Apparently the oil companies will pay it by planting more carbon-absorbing money trees out behind their refineries.

It’s a credit to misguided persistence that the President is still pursuing high-speed passenger rail, an idea that California is busy proving once again to be ridiculously expensive and impractical. And somehow I’d feel much safer in an autonomous car from Google or Apple than one from the the same government that brings us the IRS.

 

Scott Hodge, New IRS Data: Wealthy Paid 55 Percent of Income Taxes in 2014 (Tax Policy Blog).

distribution 2014 income

“So while many politicians may argue that the wealthy don’t pay their fair share of income taxes, the data simply does not support that opinion.”

 

Russ Fox, Maryland Suspends Processing Tax Returns from 23 Liberty Tax Service Locations:

For consumers, the advice that Maryland noted in their press release is accurate: “Taxpayers should carefully review their returns for these issues and should be suspicious if a preparer: deducts fees from the taxpayer’s refund to be deposited into the tax preparer’s account; does not sign the tax return; or fails to include the Preparer Taxpayer Identification number “PTIN” on the return.” I’ll add, if you don’t own a business and see business income on your return, there’s a problem.

Indeed.

Kay Bell, Lesson from IRS hardware failure: Be prepared for the unexpected during tax filing season. The hardware went back on line yesterday afternoon. 

TaxGrrrl, Update: IRS Website Back Online, Tax Refunds Unaffected

Peter ReillyIRS And The Tea Party – Scandal Enters A New Millennium. Peter observes The TaxProf’s Day 1000 Tea Party Scandal entry.

Keith Fogg, Discharging Late Filed Returns – A Novel but Unsuccessful Approach. “The case shows the creativity that can come into play in the face of very long odds.”

Robert Wood, Bank Julius Baer Hit With $547M Criminal Tax Evasion Penalty, Two Bankers Plead Guilty

 

Me, Tax credits for a few vs. business deductions for everyone. I take my battle against cronyism and for conforming Iowa tax law to 2015 federal changes to IowaBiz.com, the Des Moines Business Record Business Professional’s Blog.

 

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TaxProf, The IRS Scandal, Day 1,002. Another supposedly-erased hard drive sought by investigators miraculously reappears.

Megan McArdle, Obamacare’s Cadillac Tax Will Not Survive. The way pieces of the machine keep falling off, you might wonder if it wasn’t very well designed.

Renu Zaretsky, A Budget, Capital, Growth, and TransparencyToday’s TaxVox news roundup covers the Obama oil fee, last night’s Sanders-Clinton debate, and lots more.

News from the Profession. Lying About Your Financial Statements Being Audited Still Frowned Upon (Caleb Newquist, Going Concern).

 

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Tax Roundup, 2/4/16. Confirmed: Governor opposes coupling to ALL 2015 changes. And: Are hipsters really flocking downtown?

Thursday, February 4th, 2016 by Joe Kristan

coupling20160129Worst Iowa tax policy decision ever. Governor Branstad doesn’t want to conform Iowa’s tax law to any of the extender provisions passed in December for 2015. A reliable source has confirmed our earlier report that the Governor wants to skip coupling entirely for 2015, and then conform to everything except Section 179 and bonus depreciation in 2016 and beyond.

It’s bad enough that he doesn’t want to conform with the $500,000 federal Section 179 for the first time in years — imposing a big tax increase on small businesses and farmers in every county. But conforming to nothing means a whole host of separate Iowa computations for 2015 returns — and 2015 only. Without spending a lot of time, I come up with these:

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

I have asked the Department of Revenue for a complete list of affected provisions, and I will provide it if they send one.

These will have effects on thousands of taxpayers ranging from minor annoyance and more expensive tax compliance to major unexpected Iowa tax expense. To take a common example, the exclusion fo IRA contributions to charity allows taxpayers aged 70 1/2 or older to have their IRAs make contributions to charity directly. This means the contributions bypass their federal 1040s altogether. But for Iowa, the Governor would have the IRA holder include the contribution in taxable income and then, presumably, add it to their itemized deductions — if the taxpayer itemizes in the first place.

Some of these can be very costly. For example, the exclusion of gain for qualifying C corporation stock sales can apply to up to $10 million of capital gain. The exclusion benefits start-up businesses, which Iowa allegedly supports with at least four separate tax credits. Failure to couple would clobber a $10 million 2015 gain with an unexpected $898,000 tax bill.

There is bipartisan support for coupling with all federal provisions other than bonus depreciation for 2015. The Iowa House of Representatives has already passed such a bill on a bipartisan 82-14 vote. But Governor Branstad and Senate Majority Leader Gronstal have apparently reached a little bipartisan deal of their own to keep the Senate from ever voting on 2015 conformity. The Senate tax committee meeting yesterday was cancelled, which I hope means the Senate leadership is getting pressure to back off this stupid policy.

If you are affected, or if your clients are (they are), I encourage you to let your Iowa Senator know how you feel.

Related Coverage:

Iowa House passes $500,000 Section 179, but prospects bleak in Senate.

Iowa Governor reportedly opposes 2015 coupling for anything.

Branstad budget omits $500,000 Section 179 deduction for Iowa; no 2015 conformity.

 

20130218-1What do you mean, IBM doesn’t stock the vacuum tubes anymore? IRS Systems Outage Shuts Down Tax Processing (Accounting Today):

The Internal Revenue Service said Wednesday evening its tax-processing systems have suffered a hardware failure and that tax processing could be affected into Thursday.

“The IRS experienced a hardware failure this afternoon affecting a number of tax processing systems, which are currently unavailable,” said the IRS. “Several of our systems are not currently operating, including our modernized e-file system and a number of other related systems. The IRS is currently in the process of making repairs and working to restore normal operations as soon as possible. We anticipate some of the systems will remain unavailable until tomorrow.”

The IRS says it’s confident that it will have the system restored by the weekend and that any refund delays will be minor.

Related: IRS Having One of Those Days (Caleb Newquist, Going Concern); TaxGrrrl, IRS Website Hit With Hardware Failure, Some Refund & Payment Tools Unavailable.

 

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Jason Dinesen, The Iowa Trust Fund Tax Credit is $0 for 2015

Robert Wood, Perfectly Legal Tax Write-off? Lawyer Fees — Even $1,200 An Hour

Russ Fox, A Tale of Three States. “Hawaii, Indiana, and Mississippi are three states where daily fantasy sports (DFS) is being debated. The three states are representative of what is likely to occur in every state.”

Keith Fogg, Verification of Bankruptcy Action in a Collection Due Process Case (Procedurally Taxing). “Because Appeals employees often have very little knowledge of bankruptcy, this case points out the need to pay careful attention in CDP cases that follow bankruptcy actions and challenge verifications where the Appeals employee fails to acknowledge the impact of the bankruptcy case.”

Bob Vineyard, Aetna Not Pulling Plug on Obamacare …. Yet (InsureBlog). Many Iowans get coverage through Aetna’s Coventry unit. But as the company expects to lose $1 billion over two years on Exchange policies, their willingness to continue to provide ACA – compliant policies on the exchange will be sorely tried.

Jack Townsend, Another Taxpayer Guilty Plea for Offshore Account Misbehavior

Peter Reilly, Tax Dependency Exemptions For Noncustodial Parents – It Is All About Form 8332. It really is. Form 8332 provides a way for couples to continue fighting long after the divorce is final.

Jim Maule, “Can a Clone Qualify as a Qualifying Child or Qualifying Relative?”

 

Scott Greenberg, The Tax Benefits of Having an Additional Child (Tax Policy Blog). In case your decision hinges on this.

Renu Zaretsky, Debates, Energy, Credits and PrepToday’s TaxVox roundup covers tonight’s Democratic Debate, energy tax policy, and a shutdown of 26 Liberty Tax franchise operations in Maryland.

TaxProf, The IRS Scandal, Day 1,001

 

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Is Hip, Cool Des Moines Really Attracting Migrants? (Lyman Stone). I haven’t seen any local media pick this up, but this is a fascinating look at migration and population patterns Downtown and across Polk County. It is inspired by the recent Politico piece on how hip and all we are (emphasis in original):

In fact, throughout the article, there’s an interesting claim made that the population of downtown Des Moines has risen from 1,000 at some unspecified time in the 1990s, to at least over 10,000 as of 2016. In fact, throughout the article, there’s an interesting claim made that the population of downtown Des Moines has risen from 1,000 at some unspecified time in the 1990s, to at least over 10,000 as of 2016.

The claim turns out to be exaggerated, but only a little:

Downtown Des Moines probably did not gain 10,000 residents from the late 1990s to 2016, nor does it seem likely that it had just 1,000 residents at any time in the last few decades. However, that doesn’t mean the essential claims of Woodard’s story are wrong. Au contraire, Des Moines has gained about 10,000 people since 2000, and has about 9,000 more people than we would expect had 1987 growth rates continued. That’s a meaningful acceleration in urban growth, and a significant number have been headed to the very center of the city.

It’s a great read with some surprising observations about how suburban and downtown growth complement each other.

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Tax Roundup, 1/26/16: Tempt not your tax pro. And: Airbnb, Buzz, and inspiring emails from the boss!

Tuesday, January 26th, 2016 by Joe Kristan

dimeIf only she had taken an IRS-approved ethics continuing education course. Accountant charged in $1M embezzlement case (Herald-Dispatch.com):

HUNTINGTON – A local accountant is charged with 953 criminal counts accusing her of embezzling more than $1 million from at least one client’s account over a five-year period, according to criminal complaints filed by the West Virginia State Police.

Kimberly Dawn Price, 57, of Huntington, was arraigned Friday on 302 counts of embezzlement, 326 counts of forgery, and 325 counts of uttering at Cabell Count Magistrate Court.

There’s so much that has gone wrong here. For example:

According to criminal complaints, Price, while employed as a staff accountant at the Huntington-based firm Hess, Stewart, and Campbell, PLLC, was directly in charge of the account of Elizabeth Caldwell, a Huntington woman who died in the fall of 2015.

That’s a lot of authority for a staff accountant. I don’t understand, though, why anybody would give their outside accountant full access to their checking accounts. Or why any accounting firm would ever want its employees to deal with that sort of temptation. To be sure, the partners may not have known she had the client checkbook.

When hiring a tax pro, you want them to do a good job of preparing your return, helping you comply with the tax law, and getting you refunds when they are due. It’s not their job to spend it for you. They don’t need your checkbook.

 

Let us operate in your town, you’ll be glad you did. Airbnb, the online facilitator of private short-term rentals, not long ago announced that it would work with states and localities to collect lodging taxes. I suspected that they would use the lure of revenue to convince reluctant municipalities to allow them to operate. Yes, there are silly municipalities, like my own West Des Moines, who prevent people from renting their homes out for, say, the Iowa Caucus crowd.

Now Airbnb seems to confirm my suspicions with their new report, AIRBNB: Generating #2 BILLION IN POTENTIAL TAX REVENUE FOR AMERICA’S CITIES.

Just the sort of argument that carries weigh in city halls everywhere.

 

buzz20150827The bees may be quiet for the winter, but Robert D. Flach is Buzzing! Today’s Buzz covers 1095-Cs, retirement savings, state anti-fraud measures, and a certain national tax prep franchise.

Russ Fox, FTB’s New MyFTB Impresses; Will the IRS Take Heed?:

If you’re a tax professional who deals with California clients or a California taxpayer, I urge you to enroll in MyFTB. I’m very impressed. I may rag on the FTB (especially in the enforcement area) but from my point of view MyFTB is a model to be emulated by the rest of the country.

California has made it easier for practitioners to get powers of attorney online.

Robert Wood, Married Filing Joint Tax Returns? IRS Helps Some Couples With Offshore Accounts. “The new rules are a welcome change. But they should still underscore the importance of deciding which disclosure program is right for you.”

Emily CaubleReforming the Non-Disavowal Doctrine (Procedurally Taxing) “I will refer to courts’ resistance to taxpayers’ attempts to invoke substance-over-form as the ‘Non-Disavowal Doctrine.'”

Jason Dinesen, Glossary: 529 Plan. “The term “529 Plan” is a generic name given to tax-advantaged savings accounts for college expenses.”

William Perez, Tips for a Tax-Efficient Divorce, Plus a List of What to Do First

Annette Nellen, Recent Tax Law Change Cautions

Kay Bell, Arizona proposal: a state tax credit for gun classes. Tax credits. Is there anything they can’t do?

 

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Scott Greenberg, How the Tax Code Discourages Investment, in One Statistic (Tax Policy Blog). “The results are disheartening: over time, U.S. corporations will only be able to deduct 87.14 percent of the cost of investments they made in 2012, in present value terms.”

Renu ZaretskyOutlooks, Deficits, Breaks and Moves. Inversions, deficits forever, and state budget battles.

TaxProf, The IRS Scandal, Day 992

Sebastian Johnson, State Rundown 1/25: State of the States (Tax Justice Blog). “Read all about the latest tax debates in West Virginia, Indiana, Kansas, Massachusetts, and North Carolina. Plus a listing with links to State of the State addresses.”

 

News from the Profession. Confidential to a Certain Deloitte CEO: Millennials Don’t Need Any More Emails (Caleb Newquist, Going Concern)

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Tax Roundup, 12/4/15: Keeping inmates busy, Keeping CPAs fit.

Friday, December 4th, 2015 by Joe Kristan

20150916-3It’s important that our inmates feel they have a purpose. A few years ago Edward Hugh Okun was sentenced to 100 years in federal prison after being convicted on charges of buying and looting Section 1031 exchange intermediaries, stealing $126 million earmarked to close tax-free swaps, spending it on yachts and other rich-man toys.

Mr. Okun apparently tried to make the best of his situation. Tax Analysts reports ($link) that David Chityal, a Canadian national, has pleaded guilty to helping Mr. Okun divert $2.3 million in tax refunds from a fund set up to pay restitution to Mr. Okun’s fraud victims. From the report:

Following Chityal’s release in March 2010 and his deportation to Canada, the men maintained regular contact and developed plans to obtain $2.3 million in tax refunds intended for the bankruptcy estate handling Okun’s businesses. The indictment said the two men planned to put $500,000 of the tax refunds toward hiring a specific “prestigious New York lawyer” to handle Okun’s appeal and use the remainder for personal enrichment.

Chityal hired a Canadian lawyer to complete a process to grab the tax refund checks, travel to the Beaumont prison to have Okun endorse the checks, and then fly to the Turks and Caicos Islands to deposit the checks in a trust controlled by Okun. However, an attorney for the bankruptcy estate discovered the scheme, tracked the Canadian lawyer to the islands, and had the checks sent back to the United States hours before they were to be deposited.

The Bureau of Prisons inmate locator says Mr. Okun has a projected release date of April 30, 2095. This sort of thing could roll that back a bit.

Related:

A 10-year sentence is plenty, assuming fire ants are involved

WHEN A LIKE-KIND EXCHANGE IS TOO TAX FREE

Department of Justice Press release

 

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Kyle Pomerleau, Deficit Worries Over a Permanent Extenders Package? (Tax Policy Blog). The post addresses the lie underlying the nature of “temporary tax breaks”:

The extenders are a perfect example of what the current law baseline can miss. Under current law, extenders have already expired. So current law estimates assume that the federal government will collect revenue as if the extenders are no longer there.

However, this does not reflect our recent experiences with the extenders. Every year, for the past several years, Congress has retroactively extended the extenders and reduced actual revenues that the CBO believes the Treasury will collect. And there is no reason to believe that this would not keep happening. However, CBO’s current law baseline will still assume that the government will collect revenue over the next decade as if the extenders didn’t exist. In other words, the CBO current law baseline likely overstates the amount of revenue that the federal government will actually collect over the next decade.

Any “temporary” tax break that is extended once should be considered permanent for budget purposes. Maybe we should even remove the four words of the preceding sentence starting with “that.”

 

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It’s Friday! Get ready for your weekend with fresh Buzz from Robert D. Flach. Today’s roundup from Robert runs from musical theater to fraudulent earned income tax credit claims.

Speaking of musical theater, I have a son playing bass in the house band for a run of Ain’t Misbehaving in Chicago right now. Go if you can, because it’s a great show and because I want to stay in a nice nursing home someday.

Robert Wood, When Foreign Banks Ask For U.S. Taxpayer ID, How Should You Respond? “FATCA letters are everywhere, and foreign banks want you to certify that you’re complaint with the IRS.”

Jim Maule, Rubbing Tax Penalty Salt Into the Tax Liability Wound:

There are two lessons here. First, if using a preparer, be certain to provide the preparer with all necessary information, even if that means providing the preparer with more information than is needed. It is better to over-include than to under-include. Second, review the return.

A preparer signature isn’t a magic charm that makes any tax problems go away.

Keith Fogg, Who Can/Must Sign the Power of Attorney Form (Procedurally Taxing)

Jack Townsend, IRS Use of Cell-Site Simulators (Also called Stingray) to Retrieve Information About and From Cell Phones

Me, Estimated tax payments: who needs to file quarterly. My new post at IowaBiz.com, the Des Moines Business Record’s Business Professionals’ Blog.

 

Howard Gleckman, The Highway Bill Takes Congress on a FAST Track to More Debt (TaxVox). Fiscal gimmickry lives.

TaxProf, The IRS Scandal, Day 938. Today’s post links to a voice for the “no scandal here” crowd.

They lack a lot more than that. Illinois Needs Budget, but Leaders Lack Urgency (Sebastian Johnson, Tax Justice Blog).

 

News from the Profession. Here Are Some Health Iniatives Accounting Firms Should Consider for the Upcoming Busy Season (Leona May, Going Concern). I’m not sure “treadmill desks” send the right message.

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Tax Roundup, 11/9/15: Waterloo! And Estonia!

Monday, November 9th, 2015 by Joe Kristan

Day 1: Waterloo! The ISU Center for Agricultural Law and Taxation Farm and Urban Tax Schools are underway! I am on this morning’s panel in beautiful Waterloo, Iowa, with Roger McEowen and Kristy Maitre. Spaces are available for all of the remaining Iowa sessions, so register today! If you can’t make one of the sessions in person, you can attend the December 14 Ames session via webinar.

The November 9 session of the Farm and Urban Tax School in Waterloo is underway!

The November 9 session of the Farm and Urban Tax School in Waterloo is underway!

The early-rising schedule for the drive up here today requires an abbreviated roundup today, so let’s roll.

 

Kyle Pomerleau Estonia’s Growth-Oriented Tax Code. (Tax Policy Blog). It excerpts a speech from the Estonian Ambassador to the U.S.:

The main components of the Estonian tax system have been in place since the beginning of the 1990s. After Estonia regained independence in 1991, the country needed a tax system that was compatible both with the limited experience of the taxpayer who came from the Soviet communist controlled society and effective tax administration. It was essential that the tax system should support economic growth, not impede it. Therefore, a tax system was developed with an emphasis on indirect taxes. To keep the system simple, transparent and easy to use, only a few exceptions were allowed, as at the same time, tax rates were kept rather low.

A cornerstone of Estonia’s fiscal policy was corporate and personal income tax reform, which introduced the proportional, or flat tax rate of 26% in 1992, which has been reduced to 20%. Since 1999, reinvested corporate profits are no longer subject to income tax. Today, Estonian income tax system, with its flat rate of 20%, is considered one of the simplest tax regimes in the world

We could do a lot worse than the Estonian system. We certainly do now.

 

Tony Nitti, Renting Your Home On Airbnb? Be Aware Of The Tax Consequences:

Section 280A of the Internal Revenue Code, which governs the treatment of homes that are used for both personal and rental purposes, is a complicated tangle of definitions, designations, and resulting consequences. But if you’re going to start renting out a property on Airbnb or Craigslist, you’re going to need to know the rules, so let’s take a deep dive into Section 280A and see if we can’t help all of you newly-minted slumlords sort through your tax considerations.

And remember the local lodging tax that may apply.

 

Still plenty of coffee and juice in Waterloo...

Still plenty of coffee and juice in Waterloo…

 

Headline of the Day: Colorado county’s pot tax to pay for higher education (Kay Bell). 

Jason Dinesen, What Is Iowa Alternate Tax?

Peter Reilly, Republicans Want IRS To Target Hillary Clinton:

Given the outrage that Republicans have expressed about the “targeting” of the Tea Party by the IRS, you would think that they would be slow to advocate IRS political targeting.  Apparently  it is more a matter of who’s ox is being gored.

That’s why the party in power may regret the way it has politicized the IRS. It isn’t likely to remain in power forever.

 

Rachel Rubenstein, IRS Announces Procedures for Identity Theft Victims to Request Copies of Fraudulently Filed Tax Returns (Procedurally Taxing).

TaxGrrrl, Austrian Woman Destroys Million Dollar Fortune Rather Than Pay Out Heirs

Robert D. Flach offers A YEAR-END TAX PLANNING TIP on capital gains.

 

...but the breakfast treats are going fast.

…but the breakfast treats are going fast.

 

Russ Fox, Chaka Fattah, Jr. Guilty of Tax and Fraud Charges. “Chaka Fattah Jr., son of Democratic Congressman Chaka Fattah Sr. (D-PA), was found guilty on Friday of 22 of 23 tax and fraud charges.”

Jack Townsend, Financial Secrecy in the U.S. – A NonTax Example Illustrating the Law Enforcement Problem:

One of the issues is that opacity of U.S. entity structures.  The beneficial owners of corporations and other entities may simply not be known.  And states permitting such entities to be organized usually do not request any representations of ownership.  So, shady actors can easily fly under the law enforcement — including tax enforcement — radar screen.  Hence, the U.S. may facilitate evasion of other countries’ taxes by offering foreign investors secrecy as to their investments in the U.S.

In the FATCA era, it will be more difficult for us to tell foreign tax collectors that U.S. tax structures are none of their business.

 

TaxProf, The IRS Scandal, Day 912Day 913Day 914.

Renu Zaretsky, Repeal, Reform, and Maybe Retaliation. Today’s TaxVox headline roundup topics include efforts to repeal the “Cadillac Tax,” the background of the new Ways and Means Chairman, and allegations of retaliatory audits in New Mexico.

Sebastian Johnson, State Rundown 11/6: Election Day Wrap Up (TAx Justice Blog).
Career Corner. More Accounting Firms Should Let Employees Build Their Own Niche Practices (Caleb Newquist, Going Concern).

 

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Tax Roundup, 11/6/15: Time to invade rural Iowa! And: IRS backs off valuation discount limits.

Friday, November 6th, 2015 by Joe Kristan

Tax School Rampage! In the pre-dawn hours Monday I will rendezvous with Roger McEowen, Director of the Iowa State University Center for Agricultural Law and Taxation, for the drive to Waterloo and the first 2015 session of the Iowa Farm and Urban Tax Schools. We will rampage through four Iowa towns this week. The complete schedule:

Nov. 9-10 – Waterloo
Nov. 10-11 – Sheldon
Nov. 11-12 – Red Oak
Nov. 12-13 – Ottumwa
Nov. 16-17 – Mason City
Nov. 23-24 – Maquoketa
Dec. 7-8 – Denison
Dec. 14-15 – Ames

For those of you unfortunate enough to not be in Iowa, or who prefer to study from the comfort of your computer, the Ames session is also available in a live webinar.

I am on the Day 1 schedule for all eight sessions, along with Roger and Kristy Maitre, the former Iowa IRS stakeholder liaison. There are two Day 2 teams. Waterloo, Mason City, Maquoketa and Denison get Dave Bibler, Jim Goodman, and Daniel Fretheim. Sheldon, Red Oak, Ottumwa and Ames get Dave Repp and Paul Neiffer of FarmCPA Today blog fame.

We have lots to cover this year. Details of topics here, and registration information here. Say you heard about it at the Tax Update Blog and get free coffee at any session!

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Valuation power grab inoperative. Tax Analysts reports that Treasury officials have disavowed any intention of using forthcoming regulations to crack down on valuation discounts in estate planning. From the Tax Analysts report ($link):

Coming regulations on estate valuation for interests held by family members will follow not the Obama administration’s prior budget proposals, but the statute, an IRS official said November 4, signaling a welcome about-face for practitioners from earlier comments made by Treasury officials.

“There seems to be some confusion as to exactly what the guidance will rely on,” Finlow said. “We are looking to the statute as it is now. . . . We are not looking at the green book,” she said, referring to Treasury’s green book explanation of the president’s proposal on valuation discounts in his fiscal 2013 budget plan.

How do such crazy rumors get started?

In May Catherine Hughes, attorney-adviser, Treasury Office of Tax Legislative Counsel, said practitioners should look to that fiscal 2013 proposal for hints on what would be in store in the regs. The Obama administration asked Congress to amend section 2704(b) to disregard some provisions, such as some transfer and liquidation restrictions, in the valuation of intrafamily transfers of interests in family entities.

This would take the urgency out of some gift tax planning that is going on in anticipation of a crackdown on discounts for minority interests that seemed to be telegraphed by the Hughes comments.

 

buzz20150804Friday is a good day for so many reasons. Not least of which is that it’s the day Robert D. Flach posts his Friday Buzz roundup. Today his links included his year-end planning guide and bad news about the level of IRS service we can look forward to this coming filing season.

 

Robert Wood, Surgeon Hid Money In Divorce, Is Convicted Of Tax Evasion, Faces Up To 95 Years Prison:

He left the country without telling friends, family or his workplace, and secretly drove to Costa Rica He opened two bank accounts there, depositing more than $350,000 in cash. He also hid a thousand ounces of gold in a Costa Rican safe deposit box. Crossing into Panama, he opened another account there under the name of a sham corporation, Dakota Investments. By 2008, he had moved $4.6 million into that account.

He was hiding the money from an estranged wife and the IRS. With the benefit of hindsight he may wish he had instead invested in good divorce and tax counsel.

 

Roger Russell, Taxes in the Sharing Economy (Accounting Today). Includes a discussion of local lodging taxes for AirBNB renters.

William Perez explains Itemized Tax Deductions.

Kay Bell, New Ways and Means chairman Rep. Kevin Brady wants to move tax extenders ‘sooner rather than later’. “Like House Speaker Paul D. Ryan before him, Brady favors making the tax extenders permanent pieces of legislation.”

Paul Neiffer, Does 7 Equal 5? “For most farmers, Section 179 (at the $500,000 level) is much more important than a five-year life for equipment depreciation.”

Keith Fogg, How Does Indexing Federal Tax Lien Impact Its Effectiveness (Procedurally Taxing). “The purchasers in this case did not realize they were purchasing property encumbered by a federal tax lien because the title search did not turn up a lien against a prior owner.”

TaxGrrrl, IRS Announces Lower Fees For 2016 As PTIN Registration Opens

 

harvest

 

TaxProf, The IRS Scandal, Day 911. Today’s link discusses the scandal’s context in the larger effort of “campaign finance reform” advocates to silence their opposition by government power.

Richard Auxier, 2015 Ballot Measure Results: Tax cuts, yes; marijuana, sometimes (TaxVox).

Career Corner. CPA Exam Score Release Anxiety Is the Best Anxiety (Caleb Newquist, Going Concern).

 

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Tax Roundup, 10/16/15: Is the Earned Income Credit really all that great? And: Ed Brown house back on the block.

Friday, October 16th, 2015 by Joe Kristan

20150929-1Can a program that wastes 25% of its cost be worthwhile? While many economists left and right say the Earned Income Credit is a great poverty fighting tool, some of us who do tax for a living aren’t so sure. Now two scholars at the libertarian Cato Institute have published a report that fleshes out some of these doubts: Earned Income Tax Credit: Small Benefits, Large Costs. The report provides this background:

While the EITC is administered through the tax code, it is primarily a spending program. The EITC is “refundable,” meaning that individuals who pay no income taxes are nonetheless eligible to receive a payment from the U.S. Treasury. Of the $69 billion in benefits this year, about 88 percent, or $60 billion, is spending.

Articles by liberal and conservative pundits regarding the EITC often make it seem as if there are few downsides to the program. The EITC is aimed at reducing poverty and encouraging work. Who could be against that?

Alas, there is no free lunch with subsidy programs. The EITC has a high error and fraud rate, and for most recipients it creates a disincentive to increase earnings.

The waste and the “disincentive effects” are the things that bother me the most. The phase out of the benefits makes it very expensive to earn a little more, after a certain low-income point. My computation of the Iowa marginal rates on EITC recipients is in chart:eic 2014

That’s a 55% tax on every dollar earned, which doesn’t exactly encourage you to earn more dollars. And I don’t try to account for the hidden tax resulting from the loss of other welfare benefits as income increases.

Unfortunately, the study doesn’t really address what should replace the EITC, other than calling for generic good tax policy: “For example, cutting the corporate income tax rate would boost business capital investment. That would generate higher demand for labor, and thus raise wages and create more opportunities for American workers over time.”

I wish they had discussed the “universal benefit” that Arnold Kling and others have set forth. Arnold describes this version:

For a universal benefit, I propose something like $6000 for each adult in a household and $4000 for each child. [Charles] Murray proposed $10,000 per adult and zero per child.

Murray described the program as a cash grant. I describe it as flex-dollars that can only be used for “merit” goods, meaning health care, food, housing, and education.

Each of us presumes that people will purchase health insurance. I am explicit that catastrophic health insurance would be mandatory.

I propose something like a 20 percent marginal tax rate, or phase-out rate, for the universal benefit.

Arnold would have the phase-out as an addition to the income tax; I would couple it with the standard deduction so it phases out as part of the income tax, not as an addition to it. In any case, it would address many of the fraud and administration problems we see in the EITC.

 

honey princesses 2014

 

Robert D. Flach has your fresh Friday Buzz! Last minute filing, neglected beneficiary designations, and Dance Moms are highlighted.

Laura Saunders, Beware of Tax Surprises Lurking in Mutual Funds (Wall Street Journal). “Here’s why: By law, each year mutual funds must pay out to investors nearly all their income, which includes interest, dividends and net realized capital gains—in short, the profits on their trades minus offsetting losses… Already, one fund has announced the largest capital-gains payout some experts can remember.”

William Perez, I don’t make too much money, does the new health insurance rule apply to me?

Annette Nellen, Worker Voice, Classification and Taxes. “One of many things the “on demand” economy means is more clear and consistent rules on worker classification.”

Jason Dinesen, Glossary: S-corporation. “S-corporation is a tax term that refers to a corporation or an LLC that elects to be taxed under the rules of Subchapter S of the Internal Revenue Code.”

Jim Maule, Taxes, Consumption, Soda, and Obesity. “It is not unlikely that people who find soda to be too expensive because of the tax will spend their dollars on pies, cakes, candy, doughnuts, cookies, ice cream, and similar items.”

Leslie Book, Tax Court Holds Preparer Who Placed Truncated Social Security Number on Returns Subject to Penalties. He didn’t use a PTIN or Social Security Number on the returns he signed. The penalty is $50 per return. He prepared 134 returns in 2009. I’ll leave the math as an exercise for the reader.

TaxGrrrl, ‘Dance Moms’ Star Abby Lee Miller Accused Of Hiding Income, Indicted On Fraud Charges. So many TV shows I’ve never seen, so many indictments.

They both eat brains. Presidential candidate debates outdraw zombies (Kay Bell)

 

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Howard Gleckman, The Debt Limit: Here We Go Again (TaxVox):

The House is largely leaderless and a significant minority of its Republican caucus will oppose any increase in the federal borrowing limit. In the Senate, CNN reports that GOP leader Mitch McConnell wants major concessions from the White House on such hot button issues as Social Security and Medicare before he moves a debt bill. And a lame-duck President Obama seems increasingly disinclined to negotiate with Hill Republicans on any issue. 

Pass the popcorn.

 

Jeremy Scott, Democrats Offer Nothing Much on Tax Reform (Tax Analysts Blog):

Taxes were discussed. Bernie, of course, wants to use them to reduce the gap between the rich and the poor, something it’s not clear his plan even addresses. Chafee wants a new 45 percent bracket on higher incomes. And Hillary talked some about the numerous small tax provisions she would like to enact to accomplish extremely specific, targeted goals. But nothing said onstage Tuesday night should give any tax reform observers hope that a Democratic White House in 2017 will be any more behind a broad tax reform effort than President Obama has been.

A complicated tax code that meddles in everything is exactly what you would expect from big government fans. There’s no reason to expect reform from the avowed party of big government.

 

Kyle Pomerleau, Governor Lincoln Chafee’s Modest Tax Proposal (Tax Policy Blog).

Bob McIntyre, Although He Left out Key Details, It’s Clear Kasich’s Tax Plan Is a Deficit-Busting Giveaway to the Wealthy (Tax Justice Blog). We don’t need no stinking key details.

 

TaxProf, The IRS Scandal, Day 890

News from the Profession. Will the CPA Exam Become Optional? (Caleb Newquist, Going Concern)

 

The Brown house. Photo from IRS Auction web site.

The Brown house. Photo from IRS Auction web site.

6,000 Sq. Ft., Handyman’s and Ordnance Clearance Specialist’s Dream! The IRS is going to once again try to auction the home of Ed and Elaine Brown, the couple serving loooong prison terms as a result of an armed standoff following their conviction on tax charges. It has some unusual features, reports WMUR.com:

In the back of a closet, a hidden door can be found. A ladder leads to a small bunker with a passageway that leads just outside. Dirt hides the manhole cover that provides an exit to the passage.

Admit it, you’ve always wanted one of those.

“There’s a lot of stuff that you need to look at and say, ‘Do I want to finish it that way? Do I want to go a different direction?'” said Roger Sweeney, liquidation specialist for the IRS. “But it also comes with 100 acres, and with that price, it’s a heck of a deal.”

There are solar panels and a wind turbine on the land, but investigators have found explosive devices, as well. A warning is included in the notice of sale.

The article has a little photo tour of the property. You can learn more at the IRS auction website. The starting bid is only $125,000.

Related: Tax Update Blog Ed Brown coverage.

 

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Tax Roundup, 10/13/15: Thoughts for those facing the due date. And: Ex-Iowa revenue director backs sales tax rule.

Tuesday, October 13th, 2015 by Joe Kristan

Accounting Today visitors, click here to go to the YMCA story.

 

20151013-4It’s time. The extended return deadline is Thursday, October 15, and no more extensions are available (unless, perhaps, you are in South Carolina, drying out from the floods, or you are in an overseas combat zone).

Haven’t filed yet? Haven’t even started? Russ Fox has some thoughts for you:

Somewhere, there’s a procrastinator wondering that exact question. He’s likely thinking, “I don’t have to do anything; I have until October 15th!” That’s not a good answer (with one exception [1]).

First, most tax professionals will not be able to fit you in. I took in one new client appointment this week—and he’s filling a cancellation. Determine your income, gather all your documents, and do your best. Tax forms are available online (the IRS website is actually quite good). Commercial tax software, though flawed [2], is a good choice at this point in time.

That makes sense. You really shouldn’t file late. It’s habit-forming, and it’s a bad habit. If you have a refund coming, you will probably lose it if you don’t file in two years — and without a due date deadline, that happens a lot. If you don’t file, you can’t get a 2016 ACA advance premium credit, making you out-of-pocket for the whole thing until you file your 2016 tax return, assuming you get around to that one.

Russ has another comment worth noting:

I disagree with fellow tax professional Robert Flach on his description that all tax software is fatally flawed. For individuals in simple situation it works perfectly. It doesn’t make math mistakes. And it usually allows for seamless electronic filing. I agree with Robert that the ability to look at a return and evaluate what’s on it (does it pass the smell test) is vital but when you’re up against a deadline, you don’t have a choice.

While I am in awe of Robert’s practice of doing his returns by hand, I don’t recommend it for anyone else. While software, like any human endeavor, is “flawed,” it’s much less flawed than a do-it-yourself tax filer without software. Tax software prevents a lot more mistakes than it causes.

 

Speaking of Robert Flach, it’s Tuesday, so he has fresh Buzz! His artisanal mind wanders from the size of the tax law, charity scams, and maintaining small business records. Presumably posted with flawed software!

 

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Mike Ralston, Manufacturers shouldn’t be taxed twice. The President of the Iowa Association of Business and Industry, and former director of the Iowa Department of Revenue, defends the new proposed rules broadening the definition of “manufacturing supplies” exempt from sales tax: “To the best of my knowledge, no one inside the Statehouse has argued that the proposed rule is bad policy.” David Brunori is quoted.

 

Tulsa World, Doug Pielsticker: Sentence more than justified. “Laid-off employees blamed the company’s bankruptcy partly on Pielsticker’s lavish lifestyle, which included a $1.3 million mansion, a Bentley and a wedding with 1,000 guests at Philbrook Museum.” We covered the sentencing yesterday.

 

John Mickelson, Importance of succession planning for privately held businesses (IowaBiz.com).

TaxGrrrl, Be Smart When Being Charitable: IRS Warns On SC Flood Relief Scams

Keith Fogg, The Right Instincts and the Wrong Decision Leads to No Relief as an Innocent Spouse – An Adam and Eve Story (Procedurally Taxing) “Reading the opinion, I realized that I had watched the trial with my students and we had analyzed it in class reaching the same conclusion as Judge Lauber but still feeling sad for the individual who sought relief.”

Peter Reilly, Volkswagen’s Emissiongate May Include Tax Crimes

Jack Townsend, Schumacher, UBS Banker Enabler, Sentenced to Probation Only and Fine. Once again, slapping the real international financial criminals on the wrist while shooting the jaywalkers.

Kay Bell, Some in GOP question Ryan’s conservative commitment; others say he serves the party best as tax-writing chair.  

William Perez, Changes in Tax Deadlines to Take Effect in 2017 (Plus Deadlines for 2015 and 2016). There’s a big one this week.

 

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TaxProf, The IRS Scandal, Day 887. Today’s installment features some guy who think the IRS isn’t meddling in politics enough.

Scott Greenberg, Bobby Jindal’s Tax Plan Would End the Employer-Sponsored Health Insurance Exclusion (Tax Policy Blog):

Some of the features of Bobby Jindal’s recently released tax plan – fewer tax brackets, ending the estate tax, and eliminating itemized deductions – should be familiar from other Republican candidates’ tax plans. But a few elements of Jindal’s plan stand out from the rest of the field. Specifically, Jindal would significantly change the tax treatment of employer-sponsored health insurance plans.

It would replace the employer exclusion for health care with a “standard deduction” for insurance costs.

 

Bob McIntyre, We (Don’t) Need to Talk about Bobby Jindal (Tax Justice Blog). We don’t like him. We’ll pretend he’s not there.

Renu Zaretsky, A Speaker, A Speaker, Their Kingdom for a Speaker. Today’s TaxVox headline roundup covers the House Speaker situation, Hockey free agents, and the upcoming Democratic candidate debate.

Career Corner. The Rise of the Lifestyle Accountant (Chris Hooper, Going Concern).

 

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Tax Roundup, 10/12/15: Broken Arrow (Trucking) nets CEO 7 1/2 years. And: Last week of tax season!

Monday, October 12th, 2015 by Joe Kristan

Accounting Today visitors, click here to go to the YMCA story.

Last Week! Extended 2014 1040s are due Thursday. That’s it, no more extensions are available.  It should be all over by now, but it’s not. Don’t put your preparer off until Thursday because there might be a $25 charitable contribution you missed, and you are just too darned busy to find it today.

 

ice truckWrecked. A weird and strange payroll tax crime case wrapped up last week when James Douglas Pielsticker was sentenced to 7 1/2 years in prison.

Mr. Pielsticker was CEO of Arrow Trucking when it failed spectacularly, leaving hundreds of its drivers stranded:

December 24, 2009

Hundreds of truckers nationwide are stranded and trying to get home before Christmas after their company shut down operations with little notice.

Arrow Trucking, based in Tulsa, suspended operations and laid off employees. Arrow is among the largest trucking companies in the nation.

About 900 truckers were left stranded across the country. Many drivers learned that the company had folded only after filling up their rigs and discovering the company’s fuel credit cards would not work.

There was no money to get the drivers home because Mr. Pielsticker was using it for… other things. From the Department of Justice press release (my emphasis):

According to the plea agreement and other court records, in 2009, Pielsticker and others conspired to defraud the United States by failing to account for and pay federal withholding taxes on behalf of Arrow Trucking Company and by making payments to Pielsticker outside the payroll system.  Pielsticker and others withheld Arrow Trucking Company employees’ federal income tax withholdings, Medicare and social security taxes, but did not report or pay over these taxes to the IRS, despite knowing they had a duty to do so. 

The conspirators paid for Pielsticker’s personal expenses with money from Arrow Trucking Company and submitted fraudulent invoices to TAB to induce the bank to pay funds to Arrow Trucking Company that were not warranted.  In total, the conspiracy caused a loss to the United States totaling more than $9.562 million.

What sort of personal expenses? According to the government’s sentencing memorandum, they included:

…expenses related to his Bentley and Maserati automobiles, and trips on private jets…  In 2007, Arrow paid at least approximately $361,000 for Pielsticker’s benefit; in 2008, it was at least approximately $753,000; and in 2009, Arrow paid approximately $1,300,000 for Pielsticker’s benefit in addition to his normal salary. 

The company collapsed under the weight of the looting, and the drivers were left hanging. Fortunately, other drivers and industry players came to their rescue to get them home, showing a lot more consideration than Mr. Pielsticker.

Employment tax fraud is a very stupid crime (not that there are a lot of smart ones). Jack Townsend reports that the government has recently updated its procedures for prosecuting payroll tax fraud, a sign that this is an enforcement priority. Don’t fail to remit withheld taxes. It’s not just a bad financial move; it could get you in criminal trouble.

Related:

Pielsticker Criminal Information Document

CEO Gets 7 1/2 Years Prison Over Employment Taxes, Owes $21M In Restitution (Robert Wood)

 

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Call me when you start using the tools you have. We keep hearing how “common sense” preparer regulation is needed to keep us tax pros in line. Yet the IRS Return Preparer Office isn’t even using the authority it actually has, according to a report by the Treasury Inspector General for Tax Administration:

However, the RPO does not revoke PTINs from tax return preparers who are not compliant with their tax filing and payment obligations. In January 2015, the RPO identified 19,496 preparers with PTINs who were potentially noncompliant with these obligations. These preparers had over $367 million in tax due as of January 26, 2015. In addition, the RPO identified 3,055 preparers who failed to file required tax returns for one or more tax years and eight tax return preparers who failed to file required tax returns for five years.

Our review of PTIN holders as of September 30, 2014, identified 3,001 preparers who self reported a felony conviction on their application; 87 reported a crime related to Federal tax matters. Lastly, processes do not ensure that PTINs assigned to prisoners or individuals barred from preparing tax returns are revoked. Specifically, the RPO did not revoke the PTINs assigned to 65 of 445 confirmed prisoners and 15 of 87 individuals who the IRS identified as barred from preparing tax returns.

This supports the case that preparer regulation is more about driving out competitors of the big national tax franchises than it is about promoting quality tax compliance.

 

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Russ Fox, Gilbert Hyatt Goes to Washington…Again:

Back in 2002, the Supreme Court ruled that Gilbert Hyatt could sue the Franchise Tax Board in Nevada. That was after the FTB rummaged through his trash. The FTB was then hit with over $400 million in damages. However, the Nevada Supreme Court threw out much of the decision, though the court upheld that the FTB committed fraud against Mr. Hyatt.

Sauce for the Gander is excellent tax policy. We should get to assess the same penalties against the government that they assess against us.

Mitch Maas, Netting Tax Savings Found to be a Goal of Many NHL Free Agents (Davis Brown Tax Law Blog).

Kay Bell, Computer scientists’ tax code algorithm could make it easier for IRS to catch partnership tax cheats. If nothing else, visit Kay to check out her slick new site design.

Paul Neiffer, How Much Does Section 179 Cost the Government? Or, how much does it save the taxpayer?

Jason Dinesen, Iowa Taxation of Retirement Income

Jim Maule, A Federal Income Tax on Everybody? How Would That Work?

Peter Reilly, Jindal Tax Plan Creates A Wonderland Of Dodging

 

 

Scott Hodge, Biggest Challenge To Tax Reformers: Overcoming Our Progressive Tax Code. “But as many of the presidential candidates have found in crafting their tax reform plans, the extreme progressivity of the individual tax code makes broadening the base and lowering the rate an exercise in raising taxes on the poor and cutting taxes on the rich—hardly a winning political message.”

This chart says a lot:

20151011 effective rate chart tax foundation

 

It’s hard to have an income tax reform that doesn’t disproportionately benefit the folks who pay the tax in the first place.

 

TaxProf, The IRS Scandal, Day 884Day 885Day 886. The votes are in:

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Richard Auxier, Taxes penalize hockey teams? That’s a bad call, eh?

Career Corner, Would You Work for Revenue Share? (Chris Hooper, Going Concern). Well, I sort of do.

 

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Tax Roundup, 10/8/15: Your tax preparer has to protect your confidential info. IRS, not so much. And more!

Thursday, October 8th, 2015 by Joe Kristan

TIGTAIRS Basically Plastering Your Social Security Numbers on Billboards Now, Because Why Not? (Peter Suderman, Reason.com):

The IRS continues to recklessly print Social Security Numbers (SSNs) on hundreds of millions of notices and letters, despite warnings that this practice dangerously exposes sensitive personal information, and years of pressure to reduce the use of SSNs on documentation.

In fact, the tax agency doesn’t even have procedures in place to fully track its use of SSNs, according to a report by the Treasury Inspector General for Tax Administration (TIGTA), a tax agency watchdog.

This is a problem because of the identity theft epidemic. Every document from IRS sitting untended in your mailbox that has your Social Security number is an ID theft vulnerability. Private parties have changed their practices to protect ID numbers. One example is the adoption of secure password-protected web portals to send anything with an SSN. Another is the decline of the practice of identifying tax returns on the outside of mailing envelopes. The increased risk of attracting an ID thief outweighs the risk a taxpayer might not bother opening an unmarked envelope.

Yet TIGTA says IRS is behind the curve. From their press release:

TIGTA found that as of January 2015, the IRS estimates that it has removed SSNs from 58 (2 percent) of the 2,749 types of letters and 93 (48 percent) of the 195 types of notices it issues.

“A person’s Social Security Number is the most valuable piece of personal data identity thieves can obtain.” said J. Russell George, Treasury Inspector General for Tax Administration. “The fact that the IRS does not have processes and procedures to accurately identify all correspondence that contain Social Security Numbers remains a concern.”

Businesses have to be careful with taxpayer information because we could lose business, or be sued, or worse. The IRS doesn’t have that motivation, and it shows.

 

20151008 tax incidenceTaxProf, Who Benefits From State Corporate Tax Cuts? Firm Owners (40%), Workers (35%), Landowners (25%). The Prof links to a study of “tax incidence,” or who “really” bears the burden of the corporation tax. While politicians and activists like to talk about corporations as tax-avoiding fat cats, it’s a fact that corporations ultimately don’t pay any tax; it comes out of the pocket of an actual human somewhere. Economists will endlessly debate whether its owners, customers or workers who bear the burden. Whoever it is, it’s not a free lunch for the tax man.

 

Russ Fox, Tax Relief for South Carolinians. “Note that the relief is automatic; impacted taxpayers need not do anything.”

Robert Wood, Skimming Cash — Even From Yourself — Can Mean Prison For Tax Fraud:

Prosecutors said the Horners owned Topcat Towing and Recovery Inc., a towing business in Georgia. Between 2005 and 2008, they skimmed $1.5 million in cash from the businesses, depositing into their personal bank account without disclosing the income on their corporate or personal tax returns filed with the IRS. They tried to conceal their cash deposits from the government by “structuring,” splitting up cash deposits that exceed $10,000.

Unwise. Banks have great incentive to report “structuring,” and they do.

 

Jason Dinesen, Glossary: Audit (Of Financials)

Leslie Book, Senate Again Takes Aim at Improper Payments in Federal Programs. The government wants to use the IRS inability to stop issuing fraudulent payments as an excuse to regulate preparers.

Jack Townsend, U.S. Senators on Senate Finance Committee Probe the Tax Aspects of the Volkswagen Debacle. “As often in tax-related and other potential criminal settings, the prosecutor has a panoply of provisions to choose from.”

Kay Bell, NHL players’ goal: Play in low or no income tax states

 

Jared Walczak, How Much Does Your State Collect in Taxes Per Capita? (Tax Policy Blog).

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Iowa is #20.

 

Cara Griffith, Why Is It So Hard to Fund Schools? (Tax Analysts Blog). This article actually highlights the dangers when judges meddle in the appropriation process.

Renu Zaretsky, Questions, Subsidies, Deductions, and Profits. Today’s TaxVox headline roundup has stories on whether Volkswagen’s emission test rigging got them clean air tax credits, questions on the need to subsidize wind turbines, and much more.

 

TaxProf, The IRS Scandal, Day 882

Peter Reilly, Paul Caron’s Day By Day IRS Scandal Has Jumped The Shark – Conclusion. “I fear that the series which serves as a great resource is in danger of having its quality diluted.” I worry that the administration will succeed in running out the clock on the outrageous IRS misconduct.

Tax Justice Blog, New CTJ Report: 358 or 72% of Fortune 500 Companies Used Tax Havens in 2014, Alternate headline: 72% of Fortune 500 Companies try not to squander shareholder value.

 

Finally: Arrieta, Cubs ace Wild Card test vs. Bucs

Not tax related? Oops.

 

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Tax Roundup, 10/6/15: Tax Fairy fails to show up for Kansas ESOP. And: lots of other tax stuff.

Tuesday, October 6th, 2015 by Joe Kristan

tax fairyThe ESOP Tax Fairy Cult has long had Midwest adherents. The Tax Court told gave a Kansas believer the bad news yesterday — there is no tax fairy.

A successful Kansas orthopedic surgeon set up a new corporation, “DNA,”  with his wife. The surgeon and his wife were the only DNA employees. On the day it was incorporated, DNA created an employee stock ownership plan for its employees.

Problems arose. Tax Court Judge Dawson tells the story:

On December 31, 2008, DNA issued 1,150 shares of class B common stock to the trust with a par value of $10 per share. The trust then allocated the 1,150 shares of DNA stock to [the surgeon’s] ESOP account in 2008.

During 2008 DNA did not pay any salaries, wages, or other officer’s compensation. For 2009 DNA issued separate Forms W-2, Wage and Tax Statement, to [the taxpayers] reporting the respective amounts of $4,500 (during its fourth quarter beginning October 1). DNA issued Forms W-2 for 2010 to [the taxpayers] reporting the respective amounts of $3,000.

DNA deducted a $1,350 retirement plan contribution on its Form 1120, U.S. Corporation Income Tax Return, for 2009.

Although DNA was the sponsor of the ESOP, it did not file any Forms 5500, Annual Return/Report of Employee Benefit Plan, for plan years 2008, 2009, and 2010.

The IRS examiners found problems with this and other aspects of the way the ESOP was run (my emphasis):

    In this case, the ESOP had two separate failures to follow its plan document during 2008. First, the ESOP sponsored by DNA… allowed [the taxpayers] to participate in the ESOP as of the plan year ending December 31, 2008, in violation of the terms of the ESOP plan document regarding eligibility and participation. Second, the ESOP plan document required the ESOP to use appraisal rules substantially similar to those issued under I.R.C. sec. 170(a)(1) when it obtained annual appraisals for the same plan year. The ESOP, however, failed to obtain any appraisal for the 2008 plan year or for any plan year.

That led to a bad result:

For the reason stated above, it is determined that the ESOP is not qualified under I.R.C. sec. 401(a) for the plan years ending December 31, 2008 and all subsequent plan years. As a result, the Plan is not exempt from taxation under I.R.C. sec. 501(a) for trust years ending December 31, 2008 and all subsequent plan years.

A Google search reveals that the ESOP reported net assets of nearly $400,000 at the end of 2012. That would mean that much additional income for the ESOP participants over the term of the ESOP.  That’s an expensive sacrifice to the tax fairy. As the ESOP was set up the same day as the corporation, it appears likely that the purpose of the corporation was to feed the ESOP. Iowa has been a hotbed for bad ESOPs. While there is no evidence showing that this is linked to any other bad ESOPs, I note that the corporation had an Iowa mailing address.

The Moral: ESOPs aren’t easy. They can be useful under the right circumstances, but they require appraisals and careful compliance with the plan document an ESOP rules. They aren’t an easy tax shelter, and there is no ESOP Tax Fairy.

Cite: T.C. Memo 2015-195.

 

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It’s Tuesday, so it’s Buzz-day for Robert D. Flach. He rounds up news ranging from the developments in the Section 105 $100-per-day penalty (Tax Update coverage here) to the ongoing problems in keeping EITC from squirting all over the place.

Kay Bell, IRS says ‘No’ to tax-exempt status for pet care group offering heated spa, massages and other animal amenities. My beagle would approve this exemption.

Jason Dinesen, Glossary: MACRS. “MACRS refers to “modified accelerated cost recovery system,” which is the default depreciation method used for tax purposes.”

Russ Fox, Well, That’s One Way to Avoid ClubFed. But fatal heart attacks have serious non-tax drawbacks.

Peter Reilly, Boston Bernie Backers Probably Not Bashing Bruins

 

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Joseph Thorndike, The ‘Cadillac’ Tax Shows Why Obamacare Was Never Built to Last (Tax Analysts Blog). “All of which suggests that Obamacare will be in trouble for a long time.”

TaxProf, The IRS Scandal, Day 880

Joseph Henchman, California Supreme Court to Decide Fate of 48-Year-Old Multistate Tax Compact. (Tax Policy Blog). “Maybe it’s time we accept that the MTC isn’t working, and the Gillette case might be the first step of that realization.”

Renu Zaretsky, Evasion, Cuts, Hikes, and Drops. Today’s TaxVox headline roundup covers a planned “global crackdown” on tax evasion, business tax cuts in New Hampshire, and much more.

Leslie Book, District Court Hands IRS Loss in its Bid to Exclude Discretionary Treaty Benefits From Judicial Review (Procedurally Taxing).

Robert Wood, As IRS And DOJ Hunt Offshore Accounts, Banks Pony Up.

 

News from the Profession. Oh Great, Public Accounting Discovered the Selfie Stick (Caleb Newquist, Going Concern)

 

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Tax Roundup, 10/5/15: Cool implosion, but no tax break. And more tax fairy tales!

Monday, October 5th, 2015 by Joe Kristan

This happened in Downtown Des Moines over the weekend:

YouTube Video Courtesy star105

Preservationists wanted to save the building, the old YMCA. I never understood this. Some beautiful buildings have been lost in Des Moines, but this isn’t one of them. If you aren’t willing to buy a building and fix it up yourself, it doesn’t seem right to tell the owners that they have to do it with their own money.

But did they get a tax break for the implosion? Did they get to write off the cost of the building when they brought it down? It would seem logical — obviously the building is a total loss. But no, it doesn’t work that way. Internal Revenue Code Section 280B is pretty clear:

In the case of the demolition of any structure—
(1) no deduction otherwise allowable under this chapter shall be allowed to the owner or lessee of such structure for—

(A) any amount expended for such demolition, or
(B) any loss sustained on account of such demolition; and

(2) amounts described in paragraph (1) shall be treated as properly chargeable to capital account with respect to the land on which the demolished structure was located.

So not only is there no write-off of the building, the cost of the demolition itself is capitalized, along with any remaining basis in the building — to be recovered only when the land is sold someday. So the income tax law doesn’t encourage implosions. Pretty much the opposite.

 

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Jack Townsend, IRS Makes FOIA Disclosures to Tax Analysts Regarding OVDP and Streamlined Processing. “One point that was already known to practitioners is that rejection of the transition streamlined relief inside OVDP is not a determination of wilfulness so that, upon opt out, the wilfulness penalty is pre-determined.”

Peter Reilly, Rand Paul Suffers Setback In Foreign Reporting Lawsuit

 

Kristine Tidgren, Let the Motions Begin: Drainage Districts Seek Partial Summary Judgment. Des Moines Water Works is suing upstream drainage districts for not keeping nitrates out of the river. 

Annette Nellen, Obamacare – can pieces be removed? “Obamacare has too many complicated tax provisions in addition to many complicated non-tax provisions.”

Kay Bell, Time to make your flexible spending account choices

Sonya Miller, Freezing the Refunds of Our Guests (Procedurally Taxing). “We are aware of a group of nonresident taxpayers (taxpayers that fall under the rules for aliens temporarily present in the United States as students, trainees, scholars, teachers, researchers, exchange visitors, and cultural exchange visitors) who had their 2014 refunds frozen.”

TaxGrrrl, Treasury Sends Dire Warning To Congress: We’re Running Out Of Money Faster Than Expected.

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TaxProf, The IRS Scandal, Day 877878879. They’re still talking about impeaching Koskinen. If the administration really wants to build trust in the IRS, they’ll dump him. Until they do so, we can assume his stonewalling and stiff-arming of the GOP appropriators is the behavior the administration wants out of him.

Scott Greenberg, New Study Shows that Tuition Deduction Does Not Increase College Attendance (Tax Policy Blog):

 Last year, Bulman and Hoxby published a similar study of three federal education credits, which concluded that all three have a “negligible” effect on college attendance. This finding was in stark contrast to the Obama administration’s claim that the expansion of the American Opportunity Tax Credit made it possible for 12 million more students to earn a college degree.

The increase in subsidies over the years coincides with wild increases in tuition costs. I don’t believe that’s a coincidence.

 

Renu Zaretsky, Hope’s Limits, Math, and Cuts. Today’s TaxVox headline roundup talks about the apparent death of an international tax reform effort and efforts to improve IRS verification of earned income tax credit eligibility.

 

Russ Fox, There Is No Magic OID Process. Just like there is no Tax Fairy.

Me, Chasing the Tax Fairy. My latest at IowaBiz.com, the Des Moines Business Record business professionals’ blog. I discuss four manifestations of the Tax Fairy cult – The ESOP Fairy, the Home-based Business Fairy, the Pennies-on-the-dollar Fairy, and the Classic 105 fairy that Hank Stern spotted.

 

 

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Tax Roundup, 9/15/15: Today is a big due date. Also: more on preparer regulation, and Outlaw outlawry!

Tuesday, September 15th, 2015 by Joe Kristan

e-file logoExtended corporation, partnership and trust returns are due today! E-file is the best way to be sure to timely file. If you can’t, or won’t, e-file, Certified Mail, Return Receipt Requested, does the trick; save the postmark.

If you don’t get to the post office before they take their last smoke break for the day, you can go to the Fed-Ex or UPS store and use a designated private delivery service; be sure the shipping method you select is one of the “designated” ones at the link. Make sure the shipping bill shows that you dropped it off today, and make sure it is addressed to the proper IRS service center street address, as the private services can’t use the P.O. box service center addresses.

Third quarter estimated tax payments are also due today for calendar year filers.

Related: Paul Neiffer, September 15 is Worse Than April 15, “Most people who wait to file on September 15 or October 15 are, shall we say, not quite so efficient with their record keeping and thus, it is much tougher for us to get information and to get the tax return done.” Paul is absolutely right.

 

20130121-2Russ Fox, The NAEA Won’t Like This Post:

I’m a member of the National Association of Enrolled Agents. Generally, I’m supportive of their policies. However, I am not a fan of mandatory preparer regulation. Other than giving the IRS more money and getting rid of the lowest hanging of the bad preparers, preparer regulation won’t accomplish many positives for the general public.

The NAEA’s support of preparer regulation is baffling. The idea of the IRS certifying all preparers strikes me as a deadly threat to the Enrolled Agent brand.

Right now, EAs are the only professionals who have to pass an IRS administered test, one much more rigorous than the one in the abortive Registered Tax Return Preparer plan under the defunct preparer regulations. EAs also have much more serious continuing education rules.

For all this the EA designation is not nearly as well-known as the CPA designation, which isn’t even a tax-specific credential. The RTRP designation threatens to further obscure the EA brand.  Both EAs and RTRPs will be “IRS approved,” and given their failure to establish the EA brand so far, it’s likely to be impossible to get clients to appreciate the superior EA credential.

 

buzz20150804Buzz! With Robert D. Flach, a fresh tax blog roundup with Robert’s own inimitable style. Topics include this year’s slow-walk of the extenders legislation and the Senate push to regulate preparers.

 

TaxGrrrl, Congress May Give IRS Authority To Regulate Tax Preparers:

It’s my feeling that the bad guys are the bad guys: forcing you to take ethics courses doesn’t change that. Incompetent and lazy preparers are incompetent and lazy: forcing someone to sit through continuing education courses (likely while text messaging, trust me, I’ve been a speaker at these things) doesn’t make that person smarter or more conscientious. 

It’s another “bootleggers and Baptists” play. Prohibition was supported by do-gooders who naively thought they were making the world a better place, and by bootleggers, who profited from prohibition. Here the Baptist elder is Taxpayer Advocate Nina Olsen, and the bootleggers are the big national tax prep franchise outfits.

 

Robert Wood, IRS Offshore Account Penalties Expand, More Banks Sign.

Jim Maule, A New Tax Specialty: Porn:

 According to this report, the Alabama House Ways and Means Committee, trying to deal with a budget shortfall, has approved legislation imposing a 40 percent excise tax on, well, it depends on whose explanation is accepted. Some are calling it a tax on porn.

Well, at least they won’t have trouble recruiting auditors.

Jack Townsend, Another B   S   Tax Shelter Bites the Dust. Fill in the blanks.

Kay Bell, 3 ways to navigate estimated tax penalty safe harbors

 

TaxProf, The IRS Scandal, Day 859

Huaqun Li, Stephen J. Entin, China to Remove Dividend Tax for Long-Term Shareholders (Tax Policy Blog)

 

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Well, they were called the “Outlaws.” David Allen Coe was part of the “Outlaw” country music movement led by Waylon Jennings, Willie Nelson, Johnny Cash, and Hank Williams Jr. Now, like Willie, Mr. Coe has some tax problems. TasteOfCountry.com reports:

Country singer David Allan Coe owes the IRS nearly a half-million dollars for taxes due as far back as 1993. The singer pleaded guilty to one count of obstructing the due administration of the IRS on Monday (Sept. 14) and could face three years in prison plus a $250,000 fine.

Coe, known for his hit “Take This Job and Shove It,” owes more than $466,000, according to the Cincinnati Enquirer. This includes taxes from 2008 to 2013 when he either failed to file income tax returns or didn’t pay taxes owned. Interest and penalties are part of the figure.

Mr. Coe had a little run-in with the law at a Des Moines area casino a few years back (arrest video here), but the disorderly conduct charges were dismissed. This outlawry promises to be a little more troublesome, but now all he needs is mom, pickup trucks, trains and a drink for a perfect country and western song.

 

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Tax Roundup, 9/14/15: Hatch, Wyden sneak preparer regulation into ID theft bill. And more!

Monday, September 14th, 2015 by Joe Kristan

No Walnut ST“Bipartisanship” means they’re ganging up on you. UtahPolicy reports: Hatch, Wyden Announce Markup of Bipartisan Bill to Prevent Identity Theft and Tax Refund Fraud. In the 20-item summary of the “Chairman’s Mark,” this is buried as item 15 (my emphasis):

In June 2011, the IRS issued final regulations that established a new class of tax practitioners known as “registered tax return preparers” that it sought to regulate for the prepared by these now unregulated tax return preparers. There is substantial evidence indicating that incompetent and unethical tax return preparers are harming both their clients and the government. Most of the tax returns that involve refundable tax credits are prepared by unregulated tax return preparers.

Since 2011, the D.C. District Court (and the D.C. Circuit affirming on appeal) has prevented the IRS from enforcing these regulations on the grounds that the IRS’ authority to regulate practitioners is insufficient to permit regulation of tax return preparers who do not practice or represent taxpayers before an office of the Treasury Department.

The provision provides the Treasury Department and the IRS with the authority to regulate all aspects of Federal tax practice, including paid tax return preparers, and overrides the court decisions described above.

Preparer regulation wouldn't have bothered Rashia.

Preparer regulation wouldn’t have bothered Rashia.

Of course, increasing preparer regulation does absolutely nothing to fight identity theft.  People don’t go to unregulated preparers to arrange to have their identities stolen. Paid preparers aren’t the people who steal identities. That nasty work is done by others. It’s done by organized crime gangs in the old Soviet Union. It’s done by semi-literate street grifters in Florida. It’s done by street gangs. It’s even done by IRS agents.

Fighting ID theft by regulating preparers is like fighting pickpockets by regulating laundromats. Making tax preparers take a competency literacy test won’t touch the ID theft problem. Nor will crooks stop claiming bad refunds because the IRS wants them to take a test.

Fortunately, a powerful senator makes an impassioned argument against giving the IRS more power over preparers:

“Protecting the private information of taxpayers at the Internal Revenue Service should be of highest importance to the agency and Congress. Unfortunately, as we learned this year, highly valuable information housed at the agency is susceptible to cybercriminals.  Since this threat will not end, Congress should take appropriate bipartisan action to implement needed legislative policies that will better protect taxpayers and shield taxpayer dollars from thieves.”

Oh, I’m sorry, that’s Senator Hatch arguing that this incompetent agency should get more power over preparers. Does he even read his own stuff?

The IRS already has tools to deal with bad preparers, as the weekly parade of injunctions and indictments of preparers attests. What the IRS wants is more power and less of that annoying due-process stuff. It’s supported in this by the large tax prep franchise outfits, one of whose executives wrote the rules that the courts struck down. The big tax prep outfits want to increase barriers to entry to grow their own market share. Big companies can spread the cost of regulatory compliance over a large base of business; a sole practitioner has to absorb the cost alone. An IRS paperwork glitch that can ruin a single preparer does nothing to H&R Block. Regulation always favors the big.

The President’s recent report on excessive occupational licensing notes:

There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across State lines. Too often, policymakers do not carefully weigh these costs and benefits when making decisions about whether or how to regulate a profession through licensing.

They certainly aren’t doing so here. They plan to mark up the bill Wednesday morning. Contact your senator and representative to oppose this IRS power grab on behalf of its friends Henry and Richard.

 

TaxProf, The IRS Scandal, Day 856Day 857Day 858. Yes, let’s give these people more power over preparers, they’ve shown we can trust them.

 

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Kay Bell, Congress faces a crowded year-end legislative schedule. Not too crowded to find time to help out Henry and Richard.

William Perez, 5 Tips for the 3rd Estimated Tax Payment of 2015. It’s due tomorrow!

Robert D. Flach, MAKE YOUR LIFE EASIER AT TAX TIME BY SAVING ALL COLLEGE INFO NOW. “FYI – beginning with tax year 2016 (for returns to be prepared in 2017) you must have a Form 1098-T in order to claim an education credit or deduction on your Form 1040 (or 1040A).”

Russ Fox, Defalcations Send Randolph Scott to ClubFed. An estate tax attorney decides he needs the money more than the IRS does.

Jason Dinesen, Iowa Society of EAs to Host CPE Extravaganza. October 19 and 20, West Des Moines. “This seminar is open to any tax pro who needs CPE, so CPAs and attorneys are welcome to attend.”

Annette Nellen, Tell me – hot state tax issue of 2015?

Peter Reilly, Jeb Bush Tax Plan Could Disrupt Real Estate And Small Business. “Bush tax plan calls for elimination of business interest deductions.”

Robert Wood, Marijuana Taxes Go Up In Smoke For One Day In Colorado. Isn’t that the point?

 

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Scott Greenberg, Yahoo Spinoff of Alibaba Sheds Light on Problems with the Corporate Tax System (Tax Policy Blog):

These three obstacles – double taxation, legal complexity, and regulatory uncertainty – are present in many areas of corporate tax law, not just Yahoo’s spinoff of Alibaba. And all three significantly hinder American business operations, slowing down economic growth. The ongoing saga of Yahoo is one more example of why fixing the corporate tax code must be a priority of the federal government.  

I would add that Yahoo also ran into a politicized IRS that was under pressure to kill the deal.

Elaine Maag, Tax Subsidies for Childcare Expenses Target Middle-Income Families, Missing Many Poor Parents. (TaxVox)

 

News from the Profession. This CPA’s Mugshot Will Haunt Your Dreams. (Caleb Newquist, Going Concern).

 

 

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Tax Roundup, 9/10/15: True crime edition; or, how to get the IRS to pay attention.

Thursday, September 10th, 2015 by Joe Kristan

IMG_0603How to make sure the IRS comes looking for your tax fraud. A Minnesota man will have 6 years to ponder mistakes he made diverting employment and excise taxes he owed to finance good times. From KSTP.com:

Fifty-seven-year-old Bartolemoea Montanari, formerly of Bayport, was sentenced Wednesday. Montanari was also ordered to pay mandatory restitution of $100,000 and, additionally, to pay more than $1.5 million as a special assessment for the taxes, interest and penalties owed.

According to court documents, from 2009 until January 2012, Montanari willfully evaded the payment of employment and excise taxes owed by him and the three businesses he controlled: St. Croix Development, Emlyn Coal Processing, and Montie’s Resources.

He was convicted on the three counts of an indictment accusing him of diverting funds to a shell company from his legitimate businesses, and then withdrawing funds from the shell company to finance, well, stuff:

During sentencing, the judge noted Montanari used the money he stole to finance an “incredibly flamboyant lifestyle,” that this was “not a single error of judgment,” and that Montanari had “many chances” to correct his behavior, but did not. 

The indictment says the lifestyle included a $1.4 million home in Tennessee and “numerous personal vehicles.”

The defendant would seem to have made two mistakes to help ensure that the IRS would come snooping. First would be the “incredibly flamboyant lifestyle.” Taxgrrrl notes a Pennsylvania tax investigation apparently started when federal agents noticed a fancy house from the air. If the feds don’t notice themselves, envious or annoyed neighbors or associates might bring their questions about a flamboyant lifestyle to their attention.

More importantly, he failed to pay over employment taxes. His employees certainly  wouldn’t have failed to report their W-2 wages and claim their refunds. Despite its information processing shortcomings, the IRS can and does notice that. The main difference between committing employment tax fraud and confessing to it is the amount of work the IRS has to do before pressing charges.

 

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Speaking of foolproof crimes: Hot Lotto rigger sentenced to 10 years (Des Moines Register). The case involved an alleged inside job by an IT professional at the Multi-State Lottery:

The case has enthralled Iowans and gained national attention since late December 2011, when a New York attorney tried to claim — just hours before it would expire — a Hot Lotto ticket worth $14.3 million on behalf of a trust incorporated in Belize. The identity of the original ticket purchaser was a mystery.

Authorities with the Iowa Division of Criminal Investigation began looking into Tipton after several people identified him as the hooded man in a video showing the ticket being purchased at a Des Moines QuikTrip. At the time, Tipton was the information security director for the Urbandale-based Multi-State Lottery Association that provides games such as Hot Lotto to lotteries nationwide.

[Assistant Attorney General] Sand told jurors at trial that Tipton installed a self-deleting software program, called a rootkit, onto lottery drawing computers to manipulate the outcome of a Dec. 29, 2010, draw. Tipton then filtered the winning ticket he bought through a friend, Robert Clark Rhodes II, from Texas in an attempt to claim the money, Sand said.

There’s a reason lottery workers aren’t allowed to play the lottery. The lawyer and Belize trust didn’t help the whole thing slip by unnoticed.

 

Tony Nitti, How To Talk About The Yahoo Spin-Off Without embarrassing Yourself. A walk through the mysteries of tax-free corporate separations.

Russ Fox, IRS Removes Social Security Number from Some Notices But…:

The reason for this is the problem of identity theft. And I give kudos to the IRS for this. Unfortunately, the IRS hasn’t executed this that well.

Today I opened an IRS notice that was sent to a client. The good: The social security number in the header had only the last four digits. The bad: Right below the header the IRS put in a bar code–presumably to make processing of the return mail easier. Below the bar code in relatively small print (but easily readable by me, and I wear glasses) was the deciphering of the code. Of course, it contained the social security number.

The IRS, protecting your identity since 1913.

Jason Dinesen, From the Archives: Will Obamacare Tax Your Home Sale?

Paul Neiffer, Don’t Forget Those Fuel Tax Credits. “Most farmers obtain dyed diesel without having to paying federal and in most cases state excise taxes.  However, there can be many other uses on the farm that will allow a farmer to claim a fuel tax credit on Form 4136.”

Kay Bell, Tax diplomas, computer games and soap operas. “Will informing folks about the role of taxes in their countries, especially starting at an early age, help create more tax responsible citizens?”

Jim Maule, It’s a Failure of Some Sort, But It’s Not a Tax Failure. The professor reminds us not to believe everything you read on the internet.

 

Robert D. Flach, THE NATP TAX FORUM AND EXPO IN PHILADELPHIA – PART II

 

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TaxProf, The IRS Scandal, Day 854

Howard Gleckman, Jeb Bush’s Tax Plan: High Marks for Transparency But Key Questions Remain (TaxVox). “At first glance, GOP presidential hopeful Jeb Bush’s tax reform plan is a standard lower-the-rates, broaden-the-base overhaul of the revenue code. But a closer look shows a something-for-everyone stew filled with interesting ingredients—most basic GOP fare but seasoned with a few surprising ideas.”

 

Well, it’s not my thing, but if it’s for the kids…  Let’s Get High for the Children (David Brunori, Tax Analysts Blog):

Every proposal, like the one in Arizona, calls for dedicating marijuana tax revenue to schools, which is a terrible idea. Perhaps everyone will be stoned and won’t care, but aren’t schools important enough to pay for with real, broad-based taxes on income, sales, or property?

Politicians might look for a way to legalize slavery if they thought it would give them more revenue.

Joseph Henchman, Colorado Suspends Marijuana Tax for One Day on September 16 (Tax Policy Blog).

 

News from the Profession. Rihanna and 50 Cent Need New Accountants (Going Concern)

 

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Tax Roundup, 9/8/15: One Week to the 15th. And: First-world tax payment problems.

Tuesday, September 8th, 2015 by Joe Kristan

20150803-1September 15 is one week away. If you have extended partnership, corporation or trust returns, time is running short. There are many reasons to file on time:

  • Tax elections made on a late return, including automatic accounting method changes, may not count. With all of the “repair regulation” method changes this year, that could be a big deal.
  • If you owe money, late filing turns a 1/2% per month late-payment penalty into a 5% per month (up to 25%) late filing penalty.
  • If you have a pass-through entity, late-filing triggers a $195 per K-1 per month penalty.

Remember to e-file, or to document timely paper filing via Certified Mail, return receipt requested, or with a shipping bill from an authorized private delivery service.

 

Gretchen TegelerDART: A property tax funded amenity (IowaBiz.com). Disturbing trends on the inability of the Des Moines-area public transportation service to cover its operations through fares:

...it does appear the service expansions are generating more ridership  However, as was noted last year, property taxes are basically covering the cost of these additional riders. Total operating revenue was 10.1 percent below projections for the year that closed June 30th, 2015; with fixed route operating revenue being 8.65% percent short of budget.

The overall trends have not changed much from a year ago. Total operating revenue is still less than it was four years ago despite substantial service expansions and improvements since that time. Basically, as it weighs future improvements for DART, the community will need to decide if it is willing to continue to raise property taxes to fund them.

The post includes this chart:

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That doesn’t include the cost of the recently-completed $18 million Palace of Transit.

 

TaxGrrrl, Mega-Mansion Attracts Notice By Feds, Results In Criminal Charges:

According to local sources, federal agents flying in and out of Pittsburgh noticed the size and scope of a mansion belonging to Joe Nocito, Sr., and started asking questions. Those questions eventually led to a guilty plea last week from Ann E. Harris, the personal assistant, secretary and bookkeeper for Nocito, in a tax evasion scheme thought to involve as much as $250 million.

If you are a tax evader, it’s unwise to flaunt your wealth, especially to the point of attracting attention from passing aircraft. But maybe that would take the fun out of the thing.

 

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Russ Fox, The Family that Commits Tax Evasion Together Goes to ClubFed Together. “This is yet another reminder for everyone who uses a payroll service to join EFTPS and make sure your payroll deposits are being made. Trust but verify is excellent practice in payroll.”

Kay Bell, Labor Day tax tip: Union dues might be tax deductible

Scott Greenberg, This Labor Day, How High is the Tax Burden on American Labor? (Tax Policy Blog). “In 2014, the average wage worker saw his or her labor income decrease by 31.5 percent due to federal, state, and local taxes, according to the OECD.”

Tony Nitti, Tax Geek Tuesday: Excluding Gain On Sale Of Home, And Recognizing Gain On Repossession

Jason Dinesen, From the Archives: Tax Implications of the Unlicensed Daycare Provider

Jim Maule, “Who Knows Taxes Better Than Me?” Professor Maule notes that Donald Trump’s understanding of tax law and economics might not be all that Mr. Trump thinks it is.

Peter Reilly, From Russia With Built In Losses. “There is a certain irony to the whole thing as it seems like financiers were too focused on looting the US treasury with phony shelters to see the probably larger upside of distressed Russian assets.”

Robert D. Flach, DONALD TRUMP FOR PRESIDENT IS A LOT LIKE OBAMACARE, That isn’t meant as a compliment.

 

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Leslie Book, Tax Court Opinion Reaffirming Validity of Regulations Addressing Foreign Earned Income Exclusion Illustrates Chevron Application (Procedurally Taxing)

Robert Wood, IRS Gets Tax Data From India As Black Money Hunt Hits Americans Too

Jack Townsend, IRS and DOJ Tax Conferences Before Indictment. That doesn’t sound like fun at all.

TaxProf, The IRS Scandal, Day 849850851852

 

Renu Zaretsky, Deals, Dreams, and Data. Today’s TaxVox headline roundup covers the ground from A (Amazon’s sweet Illinois tax credit deal and Apple’s Irish strategy) to Zaretsky.

Cara Griffith, Why Is It So Hard to Find Information on the Sharing of Taxpayer Information? (Tax Analysts Blog). “Taxpayers are expected to blindly provide massive amounts of information to tax authorities, but are then not allowed to know the process through which one state or municipality shares information with another.”

 

I’ll make sure not to have this problem when I file in April:

Effective January 1, 2016, the IRS will not accept any payment greater than $99,999,999.00. Two or more checks will be required, or we recommend that the taxpayers use Fed Wire to make their payments.

If I did owe more than $100 million, I would be tempted to write one of the checks for $99,999,999.01, just to see if they are serious. Not to give away my income secrets, but I’m pretty sure my 2015 taxable income will spare me the temptation.

Cite: Announcement 2015-23.

 

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Tax Roundup, 8/27/15: Iowa cheap for the factory, costly for the headquarters. And: Instant Tax indictments.

Thursday, August 27th, 2015 by Joe Kristan

All the state taxes. The Tax Foundation has issued its 2015 Location Matters report, “a comparative analysis of state tax costs on business.” It provides a summary of the costs of operating different kinds of business, state by state, with wonderful charts like this one for Iowa:

Source: The Tax Foundation

Source: The Tax Foundation

This chart seems to show that Iowa is relatively easy on manufacturing, but a very expensive place for a service business or a distribution center — with an effective state and local rate of around 40% for distribution facilities. It also shows that the corporation income tax really only clobbers retailers and corporate headquarters.

The charts really get interesting when you compare states. Let’s turn to our neighbors in South Dakota:

20150827sd

Source: The Tax Foundation

While most industries fare much better in South Dakota than in Iowa, capital-intensive manufacturers — especially new ones — do a little worse. This is because South Dakota has a higher sales tax, and, presumably, because of the presence of Iowa’s tax incentives for new manufacturers. Once you settle in, there is little difference.

Here’s what the report says about Iowa (my emphasis):

Despite having the highest top corporate income tax rate in the nation at 12.0 percent, Iowa’s mature capital-intensive manufacturing firm experiences the lowest effective tax burden in the nation at 3.9 percent, due in large part to Iowa’s single sales factor apportionment formula and the lack of a throwback rule, which have the effect of exempting nearly all of a firm’s income from in-state taxation. The operation also experiences a relatively low property tax burden due to the lack of property taxes on equipment and inventory.

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.

Iowa offers a 50 percent deduction for federal income taxes paid, which helps mitigate the burden of the state’s high corporate and individual income taxes but is also responsible for those high rates.

In addition to its favorable apportionment factors for businesses selling goods out of state, Iowa’s benefits-based sourcing rules work to the advantage of Iowa-based firms selling services out of state. However, effective property tax rates can be exceedingly high for some firms—nearly double the national average for mature distribution centers, for instance—greatly increasing overall tax costs. Qualifying new firms (the manufacturing operations and the distribution center) receive a full abatement of the property tax on improvements for three years, though the abatement does not cover taxes on the value of the land itself.

Manufacturing machinery and research and development (R&D) equipment are exempt from the state sales tax, and the R&D facility receives other incentives as well. Iowa also offers generous investment and job creation tax incentives to new firms, though due to the state’s high tax rates, most new firms continue to experience above-average tax burdens.

This offers some lessons for Iowa’s ongoing tax reform debate:

– The Iowa Corporation Income Tax, where it isn’t futile, is a job killer, making it very expensive to locate a corporate headquarters here.

– Iowa’s vaunted tax incentives benefit the lucky and the well connected, while stifling start ups: “most new firms continue to experience above-average tax burdens.”

– Despite the recently enacted property tax reforms, Iowa’s real estate taxes still are a big cost for Iowa businesses.

The full report can be found here.

Related:

Can Iowa tax reform happen?

Tax Update’s Quick and Dirty Iowa Tax Reform Plan

 

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Instant tax unhappinessThe tax prep franchise outfit Instant Tax Service had a colorful history before it was ordered to close by a federal judge. It was notorious for “paystub” returns, prepared to claim refunds for a mostly low-income clientele before they got their W-2s. That’s something preparers aren’t supposed to do.

Yesterday things got worse for the owners of Instant Tax Service with an indictment on tax charges. A Department of Justice Press Release lists some of the allegations (my emphasis):

From about January 2004 through November 2012, Ogbazion and Wade executed a scheme to obstruct the Internal Revenue Service (IRS), wherein numerous ITS franchises filed false federal income tax returns without valid Forms W-2 and without the permission of their taxpayer clients.  The false returns included false and inflated sole proprietorship Schedule C income in an attempt to increase the Earned Income Tax Credit.  Over the course of several years, Ogbazion also instructed an ITS employee to electronically file large volumes of unsigned tax returns on the first day of the “tax filing season,” then falsely backdated customer filing authorizations.  In an attempt to obstruct IRS civil compliance audits, ITS maintained and filed false documents with the IRS, including fabricated Forms W-2 created by ITS employees using tax preparation software, and forged client signatures on various false IRS forms.

Earned income tax credit skeptics are often scolded that the 25% rate of improper payments isn’t all due to fraud; it’s because taxes are hard and all. Taxes are hard, but if there isn’t massive fraud, it’s not for lack of trying. Rather than trying to run a welfare system through the tax code, we should be looking at a universal benefit along the lines proposed by Arnold Kling.

Related:

Arnold Kling, The EITC in Practice

Tax Update, Helping the poor by increasing their marginal tax rate.

 

Vox.com, H&R Block snuck language into a Senate bill to make taxes more confusing for poor people (Via the TaxProf).

H&R Block’s entire business model is premised on taxes being confusing and hard to file.

Well, that and promoting IRS preparer regulation to put competitors out of business.

Robert Wood, Trump Firing H&R Block Could Actually Help Immigrants

 

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Jason Dinesen, Things a Business Owner Needs to Know Before Hiring Employees

Robert D. Flach, WHAT DEDUCTIONS WOULD YOU KEEP?

Tony Nitti, 2013 Tax Changes Raised The Tax Bill On The Wealthiest 2 Percent By $60 Billion. “Whether an additional $60 billion in revenue is enough to satisfy the current administration remains to be seen.” No, we already know it won’t.

TaxProf, The IRS Scandal, Day 840. More about Toby Miles. Meanwhile, Commissioner Koskinen dismisses the revelations of Lois Lerner’s canine email address under the “old news” ploy, and tells Tax Analysts ($link) that even though she hates Republicans and Tea Partiers, Lerner’s team was fair and square in dealing with their exemption applications.

Kay Bell, Lois Lerner used her dog’s email to conduct IRS business

 

Joseph Thorndike, When it Comes to Taxes, Americans Are of Two Minds – or Three, or Five or Eight. “While trying to make sense of Donald Trump’s statements on tax policy, I was struck by their disparate quality; to call them random is to exaggerate their coherence.”

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Tax Roundup, 8/5/15: Steal employment taxes? YOLO! And: what are your state’s real pension liabilities?

Wednesday, August 5th, 2015 by Joe Kristan

20150805-1Living it up now, dealing with the prison time later. The few times I have seen taxpayers get behind on payroll taxes, it has been a case of a struggling business choosing to pay vendors with money withheld from employees for taxes. It’s an unwise move; the tax law makes “responsible persons” personally liable for unpaid employment taxes, even (especially) if the business shuts down. Still, I can sympathize with these folks even though they are making bad decisions.

But there is another class of employment tax non-payers. For shorthand, I’ll call them the “YOLO” employers. A Kansas City business owner falls into this category, if a Justice Department Press Release is to be believed (my emphasis):

Joseph Patrick Balano, 54, of Kansas City, Mo., pleaded guilty before U.S. District Judge Gary A. Fenner to the charge contained in a Jan. 7, 2014, federal indictment.

By pleading guilty today, Balano admitted that he withheld employment taxes from his employees, but instead of paying over those taxes to the government, Balano kept most of those taxes for his own personal use. Balano used the money to finance his own personal expenses and expenses for family members, including gambling, mortgage payments (residence and lake house) and car payments.

Payroll tax theft is a pretty hopeless crime. It’s not like the IRS will fail to notice, and it you are living high on the stolen funds, criminal investigators are likely to step in. It’s only a matter of time.

Yet you only live once, and who knows what tomorrow brings? These thieves spend the money now on the good life, and maybe the sweet meteor of death will end the whole world come before the prison term starts. Winning!

 

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Gretchen Tegeler, How much indebtedness does Iowa really have? (IowaBiz.com):

Statewide, the total net pension liability for the two largest systems, the Iowa Public Employees Retirement System (IPERS) and the Municipal Fire and Police Retirement System of Iowa (MFPRSI) is $4.3 billion, representing 32.4 percent more than the total of all other outstanding debt for governments in these systems.  In other words, if we thought we had $13.4 billion in total debt, we really have 32.4 percent more than that. 

But it’s worse than that. This assumes annual investment returns for pension funds of 7.5%. Under a more realistic 6.5% return, the debt goes up 63.5% over what has been disclosed.

Public defined benefit plans are a lie. Using improbable actuarial assumptions, and sometimes by just not making plan contributions, politicians either lie to taxpayers about how much current services cost, or to public employees about how much they can expect at retirement, or both.

Wall Street Journal, New Rule to Lift Veil on Tax Breaks (Via TaxProf). “The rule approved Monday by the Governmental Accounting Standards Board, the municipal equivalent of the board that sets the standards for corporate reporting, will require government officials to show the value of property, sales and income taxes that have been waived under agreements with companies or other taxpayers.”

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Kay Bell, Form 1098-T will be needed to claim education tax breaks

Jason Dinesen, Glossary: Net Income/Net Loss. “Net income is what’s left after expenses. If you spent more than you took in, you have a net loss.”

Jim Maule, Mileage-Based Road Fee Inching Ahead.

 

Tony Nitti, In 2016 Election, Candidate’s Tax Returns Simply Don’t Matter. Ultimately a very depressing viewpoint, if you read the whole thing.

Alan Cole, The Details of Hillary Clinton’s Capital Gains Tax Proposal (Tax Policy Blog). “Tax structures that discourage realizations are prone to a ‘lock-in’ effect, where investors cannot reallocate to more productive investments or rebalance their portfolios to mitigate risk, because of the tax implications. The Wall Street Journal was critical of the proposal on these grounds.”

TaxProf, The IRS Scandal, Day 818

Renu Zaretsky, On Carbon, Soda, and the Safety Net. Today’s TaxVox headline roundup mentions the tax implications of the administration’s carbon reduction power grab, among other things.

 

 

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Tax Roundup, 6/29/15: Congratulations, newlyweds, here’s your tax bill! And windy subsidies, IRS stonewalling, more.

Monday, June 29th, 2015 by Joe Kristan

Welcome to the marriage penalty. The Supreme Court has spread Iowa marriage law nationwide. That means more same-sex couples will tie the knot and learn about the sometimes surprising tax results of matrimony. In general, if only one member of the couple has income, it’s a good tax deal, but not so much for two-earner couples. The weird complexity of the tax law means there are lots of exceptions.

The Tax Foundation has an excellent summary of these issues, Understanding the Marriage Penalty and Marriage Bonus. It includes this wonderful piece of abstract art illustrating how marriage can help and hurt a couple’s federal income tax liability:

Marriage penalty tax foundation chart

 

The chart has two axes: the percentage of income earned by each spouse, and the income level. Blue is good, red is bad. If combined income is just short of $100,00, it’s all good, but there is lots of room for tax pain at the top and bottom of the income spectrum for married couples.

Other coverage:

Jason Dinesen, Tax Implications of Friday’s Ruling on Same-Sex Marriage:

This ruling should not have an impact on federal tax returns because couples in same-gender marriages have been able to file as married on their federal tax returns since 2013. This ruling affects state tax returns in states that had bans against same-gender marriage.

Jason, an Iowa enrolled agent, was an early expert in same-sex marriage compliance.

 

TaxProf Blog Op-Ed By David Herzig: The Tax Implications Of Today’s Supreme Court Same-Sex Marriage Decision (TaxProf) “Same-sex couples will now be able to inherit, file joint state tax returns, possess hospital visitation rights and all other state marriage rights as heterosexual married couples.”

Kay Bell, Marriage equality means tweaks to tax code, tax forms. “Sen. Ron Wyden (D-Ore.), the ranking minority member on the Senate Finance Committee, is already working on getting the new nomenclature on the books.”

TaxGrrrl, SCOTUS Legalizes Same Sex Marriage But Questions Remain For Religious Groups & Tax Exempts

 

Wind turbineWindy Subsidy Signed. Governor Branstad has signed HF 645, which establishes a tax credit for wind energy. The credit is 50% of the similar federal credit, up to $5,000. It takes effect retroactively to 2014, giving a windfall to people who bought qualifying systems already. It will do nothing for the environment, but it will do wonders for companies selling wind energy systems.

 

 

 

Christopher Bergin, Why We Just Sued the IRS – Again (Tax Analysts Blog):

For more than two years the IRS has played its old game of hide the ball regarding requests to release Lois Lerner’s e-mails — e-mails that would teach us a lot about what actually went on during the exempt organization scandal. Many of those requests came from the United States Congress: the elected officials who control the IRS budget. The IRS’s stalling tactics have run the gamut from eye-rollingly comical to downright disturbing.

Through this and and other worrisome developments, one thing is clear: the IRS is now in desperate trouble. Most of that trouble it created itself. It would be unfair to call them the gang that couldn’t shoot straight, because when it comes to shooting itself in the foot the IRS is an expert marksman. The IRS is an agency whose initial reaction to almost anything is secrecy.

The IRS needs a big culture change, one starting with a new Commissioner.

 

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Associated Press, Ex-Rep. Mel Reynolds indicted on tax charges. Can you believe a Chicago politician who would sleep with a 16-year old campaign worker would also cheat on his taxes?

 

Russ Fox, A Peabody, Massachusetts Tax Preparer Gives an Unwitting Endorsement for EFTPS:

Mr. Ginsberg operated a traditional payroll service. It’s fairly easy to check on your payroll company if you use such a service: Enroll in EFTPS. Using EFTPS you can verify that your payroll company is making the payroll deposits they say they are. That’s a good idea–trust but verify. The DOJ Press release notes:

To cover up his scheme, Ginsberg falsified his clients’ tax returns, which he was hired to prepare, indicating that the clients’ payroll taxes had been paid in full, when they had not. When asked by clients about their mysterious IRS debts, Ginsberg gave them a litany of false excuses, including blaming the IRS and his own staff.

None of those excuses work hold up with EFTPS. Today, payroll tax deposits with the IRS are all made electronically. Is it possible for one to get messed up? Yes, but it’s very unlikely. Indeed, most payroll companies just make sure the deposits are made from your payroll bank account.

If you outsource your payroll tax, insource regular visits to EFTPS to make sure your payments are made.

 

Peter Reilly, SpongeBob SquarePants In A Tax Case!

Tony Nitti, Sloppy Drafting Saves Obamacare – Supreme Court Upholds Tax Subsidies For All. I think it was more sloppy judging than sloppy drafting that did the trick.

Keith Fogg, Aging Offers in Compromise into Acceptance (Procedurally Taxing).

Jack Townsend, Rand Paul and Expatriates to Sue IRS and Treasury Over FBAR and FATCA. They want both to be declared unconstitutional. Unfortunately, it seems like a anything the IRS wants is constitutional anymore.

TaxProf, The IRS Scandal, Day 779Day 780Day 781. Still trying to shake out the “lost” emails after 781 days. You’d think they were stalling or something. And efforts to impeach Commissioner Koskinen. It’s not going to happen, but if he had any shame, he would have resigned long ago.

Richard Auxier, Michigan, out of ideas, might ask poor to pick up transportation tab (TaxVox).

 

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Quotable:

The pledge, the brainchild of Grover Norquist, president of Americans for Tax Reform, is a terrible idea for several reasons. First, no leader should promise never to raise taxes because, frankly, there are times when it is necessary. Over 50 Kansas legislators and Brownback, who have signed the pledge, found that out last week. I agree with Norquist philosophically; less government is good. But the pledge only leads to more debt at the federal level and gimmicks in state governments.

David Brunori, Tax Analysts ($link)

 

Career Corner. EY Employee Has Eaten So Many Hours, He’s Gone on Hunger Strike (Caleb Newquist, Going Concern).

 

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Tax Roundup, 6/23/15: A foolproof tax prep scam! And more.

Tuesday, June 23rd, 2015 by Joe Kristan

One week left! To file your FBAR Form 114 reports of foreign financial accounts.

 

ice truckDid a Davenport preparer e-file different returns than he showed his clients? That’s what federal prosecutors allege. They have accused a Davenport man of preparing accurate tax returns for clients, but then e-filing different returns claiming larger refunds, diverting the extra refunds to his own account.

If true, the case is interesting in two ways.

First,It appears to have been based on fraudulent Schedule C sole proprietorship filings. These can be used to create sham losses to create extra refunds, or to create sham earned income to generate earned income tax credit. It was most likely an EITC scam, as fake schedule A deductions work as well for deductions, but not at all for generating refundable EITC.

Second, it was a horrible idea. It’s hard to imagine how he thought he would ever get away with filing returns different from what the client approved. Inevitably there would be a notice or other problem that would bring the scam to light. But the cops don’t spend their days chasing geniuses.

 

Robert Wood, Record 27 Years Prison For Tax Fraud, Beating Tax Fraud Queen’s 21 Years. The guy allegedly collected 7,000 Social Security numbers and scammed $1.8 in stolen refunds. Considering the hassle he created for the rightful holders of those numbers, that sounds about right.

buzz20141017Robert D. Flach has Tuesday Buzz for you, covering the ground from Trump to Kansas.

William Perez, Tax Advice for Cannabis Entrepreneurs. Speaking of buzz.

Hank Stern, CO-OPs: That flushing sound you hear…  It appears that other Obamacare health co-ops may go the way of Iowa’s CoOportunity.

Keith Fogg, Contrasting the Compromise Standards between the Chief Counsel, IRS and the Department of Justice in Litigated Cases (Procedurally Taxing)

Jack Townsend, Two More Swiss Banks Enter DPAs under US DOJ Swiss Bank Program. Swiss bank privacy is over. Taxpayers who have been counting on it need to check in with their attorneys.

 

Jeremy Scott, Supreme Court Could Create $353 Billion Deficit Problem (Tax Analysits Blog):

The wait continues for the Supreme Court’s decision in King v. Burwell — the Court did not release the opinion on June 22. If the Court decides in favor of King — basically making residents of 34 states ineligible for healthcare credits — that will gut President Obama’s healthcare reform effort, essentially leaving lawmakers with the choice to either fix or repeal the Affordable Care Act. Republicans are eager to do the latter, but the Congressional Budget Office may have made that more difficult. The CBO says that outright repeal would cost $353 billion over 10 years based on a static scoring model.

It’s a bit strange to think that it’s the Republicans’ responsibility to fix a law that was incompetently drafted by a Democratic Congress. And the House and Senate don’t seem inclined to follow that path anyway. 

It’s not the Supreme Court that would create the problem. It would be the administration and its Congressional allies that passed an unworkable and incoherent lawwith no support at all from the other party.

Kay Bell, No Supreme Court word yet on Obamacare subsidies,
but another part of the health care law is closer to repeal
. “The House voted on June 18 to get rid of the medical device tax.”

 

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Dita Aisyah, Tax Extenders: Take Them or Leave Them, Part 2 (Tax Policy Blog):

Currently, all 50 or so tax extenders are expired for 2015, but Congress will likely pass them retroactively as they have in the past.

Some tax extenders are genuinely good policy, while some are bad. However, the concept of an extender is silly. They create unnecessary uncertainty for individuals and businesses who need to make important long term financial plans.

This very uncertainty creates the need for lobbyists to make annual pilgrimages to Congress to beg for another year of tax breaks. I suspect that Congress likes it that way.

 

Kyle Pomerleau, Senator Rand Paul’s Payroll Tax Swap. “One striking feature of the tax plan is that it eliminates payroll taxes.”

Bob McIntyre, Detractor Dangles Shiny Objects to Obscure Facts about Rand Paul’s Deficit-Inflating Flat Tax Proposal. (Tax Justice Blog). A left-wing tax site calls the Tax Foundation right-wing.

Steven Rosenthal, The Rich get Richer, with a Little Tax Help (TaxVox).

TaxProf, The IRS Scandal, Day 775. Today’s entry covers a non Tea Party organization whose exemption was stalled because it held views disapproved by the Administration.

 

News from the Profession. There’s a Lack of Talent to Succeed Accounting Firms Because the Talent Doesn’t Exist (Caleb Newquist, Going Concern). “A recent survey of accounting firm partners from the CPA Consultants’ Alliance found that over half of respondents (51.7%) said procrastination or denial was a primary cause for firms’ succession troubles.”

 

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