Posts Tagged ‘tax crime’

Tax Roundup, 9/26/2013: Can dead horses carry preparer regulations? Also: rodent sentences.

Thursday, September 26th, 2013 by Joe Kristan

20130121-2Further reports of the appeals court arguments about the IRS preparer initiative are out, and they bode well for consumers and taxpayers.  The judges seem to have been unimpressed by the arguments that an 1884 law gave the IRS the authority it needs to impose a comprehensive regulatory regime on preparers.  TaxGrrrl explains:

 During arguments, the judges appeared skeptical of the IRS’ reliance on an 1884 statute, the “Enabling Act of 1884,” also referred to as the “Horse Act of 1884″ as sufficient authority to regulate tax preparers. The statute was the result of a post-Civil War concern about the abuse of the claim process for the value of dead horses and lost property during the war. To stem the tide of abuse, Congress granted the Secretary of the Treasury the authority to regulate the admission of agents representing claimants before the Treasury Department (the rise of the modern day Enrolled Agents), and to penalize those who failed to comply with the regulations.

The IRS argues that the law still allows for regulation of tax preparers. The statute predates the modern income Tax Code which was codified in 1913…

The amount of time that passed from the 1884 case and now didn’t go without notice in front of the panel. Consider this brief exchange between Justice Department Tax Division lawyer Gilbert Rothenberg and the panel:

Panel: That’s how many years?
Rothenberg: That’s about a century.
Judge: And then after a century, Treasury suddenly decides these words empower us to do this…?

Whatever the legality of the IRS regulation initiative, it’s bad policy.  TaxGrrrl wisely interviewed a voluble commentator on these issues:

Shortly after the amicus brief in support of the plaintiffs was filed, I called up one of the parties, Joe Kristan, to ask him about his participation. Kristan is a CPA and authors the informative and entertaining Tax Update Blog. He doesn’t have an actual dog in this fight: CPAs are exempt from most of the regulations. So why, I asked, was he involved? He offered a laundry list of reasons: it’s bad law, bad policy and bad for the consumer.

During our call, we both agreed that there are bad tax preparers out there but Kristan used that fact to seize upon one of the main criticisms of the IRS scheme: there are ways of dealing with bad acts and these regulations won’t keep the bad preparers honest. It doesn’t, for example, deal with the issue of fraud in the industry. And, he says, those who can manipulate the system will now have the equivalent of a “seal of approval” from IRS, giving consumers a false sense of security.

But what about those education requirements and the competency exams? Kristan shrugs off the notion that some testing keeps taxpayers safe, saying that the test is a “literacy test, not a competency test.” 

Other coverage:

Russ Fox,  No Loving for Dead Horses in DC Court of Appeals

Chris Stephens, Court of Appeals Not Loving IRS Arguments (Tax Policy Blog)

Kay Bell, IRS’ ‘dead horse’ tax preparer regulation argument doesn’t appear to move federal appeals court: “The consensus of practitioners who heard the arguments, during which the judges were much more critical in their questioning of Rothenberg than Loving attorney Dan Alban, is that the panel will give the tax preparers fighting regulation another victory.”

Link: Audio of oral arguments at the Federal Circuit.

 

“Affordable” Care Act.  So all of the disruption, complexity and higher taxes of Obamacare are worthwhile because it makes health insurance more affordable and available, right?   Andrew Lundeen at the Tax Policy Blog maps out the, um, savings: Obamacare Increases Premiums by As Much As 305 Percent.

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But it’s a better deal as you get older, right?

Some costs are even higher for 40-year-olds. In North Carolina, a 40-year-old man could see an increase of 305 percent and 288 percent in Nebraska. A 40-year-old woman will face increases over 200 percent in both North Carolina and Nebraska as well.

Such a deal.

 

#Tony Nitti, Lost: $67 Million. If Found, Please Return To IRS:

“The IRS has seen its summer from hell extended into autumn, as a report issued today by the Treasury Inspector General for Tax Administration (TIGTA) revealed that the Service cannot account for $67 million that was set aside in a slush fund to help pay for Obamacare.”  

Yup. That’s $67 million of taxpayer dollars that were spent on, well…nobody is quite sure what it was spent on, other than it appears to have used for employee workspaces and technology. In other words…Grand Theft Auto V for everyone!

Remember, we need to increase IRS funding.

 

Cara Griffith, The Rush Is on to Obtain Forgiveness (Tax Analysts Blog). “On Monday, September 23, Louisiana and Connecticut launched tax amnesty programs.”

Jason Dinesen, Glossary of Tax Terms: FICA   

TaxProf, The IRS Scandal, Day 140

Robert D. Flach,  TAX BLOGOSPHERE BUDDIES – JIM BLANKENSHIP

 

Great moments in Economic development.  A story about the wonders of TIF financing from East St Louis, via stltoday.com:

A former Alorton and Fairmont City cop, convicted in state court in April for pulling over a female motorist and compelling her to perform oral sex on him, pleaded guilty in federal court here on Wednesday to wire fraud and tax evasion.

Court documents show that Harry A. “Dink” Halter, 53, admitted to misusing public funds paid to his business, Town & Country Towing of Alorton.

In 2009, Halter got a $24,900 tax increment financing grant to construct a new fence around his business, court records show. Halter admitted in court that he used about $19,000 of the grant for personal expenses.

Halter also failed to report employee wages to the IRS and acted to conceal his income.

I’m sure his neighbors who are paying for the tax break appreciate what the TIF grant did to make Alorton a better place.

 

Pickup lines that never work.   Let’s Have Dinner and Talk About Death (TaxProf)

News from the profession:  PwC Acquired an Interactive Marketing Company Because Why the Hell Not? (Going Concern)

 

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Tax news from the pond:

Beavers Fined, Sentenced To Six Months In Prison For Tax Crimes (Progress Illinois)

Government: Beavers’ sentence too light (WICS.com)

Muskrats ask that sentence not be served during winter.  ”They hibernate then anyway.”

 

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Tax Update, 9/25/2013: Preparer regulation has a bad day in court. And the royal consort clarifies the record.

Wednesday, September 25th, 2013 by Joe Kristan


20130121-2
Bad Day for preparer regulation at appeals court? 
Tax Analysts reports ($link) that the judges hearing the IRS appeal of the D.C. District Court’s shutdown of Doug Shulman’s preparer regulation power grab do not appear inclined to reverse it:

The D.C. Circuit during September 24 oral arguments in Loving v. IRS, No. 13-5061 (D.C. Cir. 2013), expressed skepticism that the IRS possesses the statutory authority to implement its tax return preparer program. Stuart J. Bassin of Baker & Hostetler LLP said that the oral arguments did not go well for the government and that it didn’t appear as if the court was “buying what the government was selling.” 

I’ve heard the same thing from two attorneys who attended the session.  Preparers who have followed the story of selective enforcement of tax laws in the Tea Party scandal can’t relish the idea of giving the IRS more control over their practices.  It looks as though we may be spared that, until and unless Congress does something stupid like authorizing such preparer regulation.

Robert D. Flach has more, as does Kay Bell.  I have joined an amicus brief against the preparer regulations in this case.

 

20130925-1Incentives gone wild.  While Iowa’s state-level politicians love taking your money to lure and subsidize your competitors, the politicians in Coralville have taken it to Detroit-like levels, reports IowaWatchdog.org:

The City Council of Coralville has piled up about $280 million in debt in recent years, the highest debt per capita for a city in Iowa.

The $14,511 burden for each of its 19,219 residents is seven times higher than Des Moines or Iowa City. It’s enough to pay for 38 Iowa Hawkeyes football season tickets or three semesters of tuition at the University of Iowa.

Moody’s Investors Service, after having downgraded the city’s debt four times, was, in a recent report, particularly tough on Coralville’s “history of issuing debt of non-essential government purposes, including the construction of a hotel, golf course, performing arts center and brewery, all of which are city owned.”

All in the name of “economic development,” of course.  Or, as the department store ads used to say, the more you spend, the more you save!  Unless you are one of the unlucky owners of the 60% of property in Coralville that isn’t in a tax-priviliged TIF district.

 

Jason Dinesen, IRS Guidance on FICA Refunds for Same-Sex Married Couples   

Jack Townsend,  Government Refusal to Grant Immunity Shifts Burden of Proof to IRS in Tax Court Case.  But he isn’t sure it will do the taxpayer any good.

 

TaxProf, The IRS Scandal, Day 139

Tony Nitti,  Understanding The Impact Of Legalized Recreational Marijuana On State Tax Revenue   Well, it might not seem to matter so much.

William Perez,  Average Child Tax Credit by State

William McBride,  America Loses another Fortune 500 Company due to High Corporate Taxes (Tax Policy Blog).  A US company, Applie Materials, Inc., acquires a Japanese company, and they move combined headquarters to… Holland:

 The U.S. and Japan have the highest statutory corporate tax rates in the developed world, and by most measures the highest effective corporate tax rates as well. In contrast, the Netherlands has a statutory corporate tax rate of 25 percent, compared to 39 percent in the U.S. and 37 percent in Japan. The Netherlands also has the most generous capital allowances for plant and machinery in the developed world, which is particularly important for these two manufacturing firms. Lastly, unlike the U.S., which taxes foreign earnings on a worldwide basis, the Netherlands uses a territorial tax system, which largely exempts foreign earnings from domestic taxation.

Howard Gleckman, An Upcoming Debate on Whether Private Equity Should Pay Higher Taxes.  (TaxVox) Yes, this country needs nothing more than lower returns to capital.   Just ask the people at Applied Materials.

 

David Brunori, Marriage and Religious Freedom Act Promotes Neither (Tax Analysts Blog):

The tax laws should be neutral when it comes to politics. Personally, I would end all tax exemptions for all political groups — gay, straight, or in between. The IRS rightfully took considerable heat when it singled out conservative groups for scrutiny. But the Marriage and Religious Freedom Act isn’t the answer.

More legislation seldom is, unless it just repeals old legislation.

 

Is there anything tax law can’t do?  Russians Consider Boosting Divorce Tax, Citing ‘Moral And Demographic Decline’ (TaxGrrrl)

 

Tax Justice Blog,  ITEP Analysis: Cuccinelli Tax Plan Mostly Benefits Wealthy Virginians – and Cuccinelli.  When the rich pay most of the taxes, any tax cut will “disproportionately benefit the wealthy.”

Taking a stand: Does the Economy Need Stimulus or Austerity? Yes. (Joseph Thorndike, Tax Analysts Blog)

 

 

20130717-1The Royal Consort clarifies the record.  TBO.com reports that the partner-in-crime of Rashia Wilson, self-proclaimed “Queen of IRS tax fraud,” wants to set the record straight:

He may have been her partner in crime, joining forces to steal millions from federal taxpayers.

He may have spent time at her house and shared “romantic liaisons.”

But Maurice Larry wants people to know he most definitely was not the boyfriend of Rashia Wilson, Tampa’s notorious self-dubbed Queen of Tax Fraud.

Just a good friend with benefits.

Wilson, who became known for her brazen Facebook postings taunting authorities about the millions she was stealing from taxpayers through stolen identity tax refund fraud, was sentenced in July to 21 years in federal prison.

Larry, who spent $100,000 covering a Camaro in chrome, was sentenced Tuesday to 14 1/2 years in federal prison, a sentence he is to serve at the same time as an 8-year, 5-month sentence he received Monday in another tax refund fraud case.

A chrome Camaro?  I suppose it went well with Ms. Wilson’s platinum hairdo.

 

That means they aren’t eating at the right places.  Deloitte Study: Accountants Don’t Have Fire in Their Bellies (Going Concern).

 

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Tax Roundup, 9/13/2013: Good luck and honey traps edition.

Friday, September 13th, 2013 by Joe Kristan

20130415-1It’s Friday the 13th.  Do you know where your extended 1041, 1065, 1120, or 1120-S is? They’re due Monday!  If you have a pass-through return due, late filing penalties start at $195 per K-1.  E-file, or use certified mail, return receipt requested.  It makes for good luck if the IRS says you filed late.

 

 

Christopher Bergin, Tax Avoidance Just Isn’t What It Used To Be:

Setting aside for now the place of moral scruples in a tax rate, some are arguing that corporations have a higher duty to the countries where they do business and the citizens they sell to than simply paying the lowest amount of tax possible. That argument challenges other well-established theories, among them that corporations have a duty to maximize the investment of their shareholders. Well, is it the only duty of a multinational corporation to maximize value for its shareholders?  

Well, it sure isn’t to maximize value for its tax collectors.

 

Jason Dinesen,  Same-Sex Marriage and Minnesota Taxes.  ”Effective with 2013 tax returns, same-sex married couples who file Minnesota tax returns will be required to file those returns as married.”

Phil Hodgen,   Electing Resident Alien Status Under Section 7701(b)(4).  ”This election is used by nonresident aliens who become residents of the United States after the middle of the year, and do not hold a green card.”

 

csi logoTaxGrrrl,  Back To School: Paying For College With 529 Plans:

For federal income tax purposes, putting money in a 529 plan won’t result in a deduction (as it would with, say, an IRA). However, neither the earnings nor the distributions in 529 plans are taxable for federal income tax purposes.

I like Iowa’s Sec. 529 plan, College Savings Iowa.  You get  a deduction for contributions up to $3,045 per donor, per donee on your Iowa 1040; it works like a 6% negative load, and you get the usual federal Sec. 529 benefits too.

 

Russ Fox,  Bankruptcy Trumps a Deemed Sale.  California’s tax authorities don’t get to decide the tax implications of a bankruptcy by themselves.

Leslie Book,  CDP: When is a Document Establishing Liability Received? (Procedurally Taxing)

 

TaxProf, The IRS Scandal, Day 127

Kay Bell,  IRS investigations are baaaaack!

 

Tax Justice Blog,  State News Quick Hits: Missouri Legislature Fails to Override Governor’s Tax Cut Veto and More

Jack  Townsend, Swiss Bank Rahn & Bodmer Under DOJ Criminal Investigation 

William McBride,  “Red” China Taxes Capital Relatively Lightly (Tax Policy Blog)

Howard Gleckman,  Eight in Ten U.S. Households Pay Social Security and Medicare Taxes.   Yet those two programs are actuarial disasters, so they don’t even cover their benefits.  Mr. Gleckman’s use of this as a defense of exempting them from all income taxes is unconvincing.

Robert D. Flach has your Friday Buzz roundup of tax news!

 

No, it’s about restricting guild membership to keep salaries up.  Getting a PhD in Accounting Isn’t Really About Teaching (Going Concern)

News you can use.  To Enjoy Driverless Cars, First Kill All the Lawyers (Megan McArdle)

 

Sometimes taxes aren’t the most interesting part of the story.  Certainly not in a case reported by the Contra Costa Times about an attorney who apparently will plead guilty to tax charges:

Mary Nolan, 61, of Oakland, was indicted by a grand jury in September 2012 on six counts related to accusations that she failed to report $1.8 million in earnings to the Internal Revenue Service and placed eavesdropping equipment on the cars of her clients’ spouses with disgraced former Concord private investigator Christopher Butler. Court records show that she’s scheduled to enter a guilty plea before Judge Charles Breyer on Sept. 27, although no details as to her plea agreement have been made public.

Illegally bugging cars?

Nolan also is a defendant in two of the half-dozen civil lawsuits pending in state and federal court lodged by the targets of Butler’s “dirty DUI” stings in 2011 and 2012.

Butler’s employees, usually attractive women, would entice the estranged spouses of Butler’s clients to get drunk and drive, at which time Butler would encourage police to arrest the targets for DUI, giving his clients leverage in divorce and child-custody proceedings.

Nolan is accused of helping arrange the arrests of Concord aeronautics engineer Dave Dutcher and Clayton contractor Declan Woods, whose ex-wives, Susan Dutcher and Louise Woods, were represented by Nolan in family law court.

Somewhere a Mr. Dutcher and a Mr. Woods could be excused for enthusiastically toasting this turn of events alone and at home.

 

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Tax Roundup, 8/27/2013: This isn’t Butte edition. And: you’re not your mom!

Tuesday, August 27th, 2013 by Joe Kristan

Flickr image by Ellenm1 under Creative Commons licenseThe Great Iowa RV Roundup.  Iowa has caught on to recreational vehicle owners who have registered their units in Montana to save taxes and fees.  Now the Department of Revenue is giving these Iomontanans a chance to come clean and avoid harsh newly-enacted penalties for misregistration.

From the Des Moines Register:

State officials say the offer would require owners to pay a 5 percent vehicle registration fee, based on the purchase price. They also would pay a penalty of 10 percent of the fee.

So under the terms of the settlement, the owner of a $200,000 motor home registered in Montana would pay a $10,000 fee to properly register it in Iowa. On top of that, a $1,000 penalty would be assessed.

Violators who don’t accept the settlement could face fraud charges, ranging from a simple misdemeanor to a felony. They can also be hit with fines equal to 75 percent of the fee that was evaded. For example, if someone should have paid $25,000 on a plush $500,000 motor home, they could be slapped with total fees and penalties of $43,750.

I think you could buy a passable used camper for $43,750.

 

Richard Borean, Scott Drenkard, Monday Map: Combined State and Local Sales Tax Rates

c7ketyi3

 

Iowa’s just about in the middle.

 

You’re not your Momma.  While mothers love to help out their children, a St. Louis-area man seems to have expected too much of Mom when he filed his tax returns.  Stltoday.com reports:

To reduce his tax liability, he claimed $18.2 million in losses associated with a number of entities, including Morriss Holdings, MIC Aircraft, Tech Aircraft and MIC Real Estate, that were limited liability companies established for his mother. His mother had already claimed the losses for her own benefit in previous years, the U.S. Attorney’s Office said.

There are some things Mom just can’t do for you.  The man pleaded guilty to tax evasion charges yesterday.

 

Martin Sullivan, New Hampshire’s Value Added Tax (Tax Analysts Blog):

But where New Hampshire really shines is with its Business Enterprise Tax. Like the BPT, the BET applies to all business regardless of legal form. Newly-elected Republican Governor Steve Merrill was the driving force behind original passage of the tax in 1993. The original rate was 0.5 percent. It is now 0.75 percent. The tax base is the sum of: (1) compensation paid to employees; (2) interest paid on debt; and (3) distributions to shareholders and owners. Except for the exclusion of undistributed profits from the tax base, the sum of these components is a firm’s value-added tax.

I still prefer the Tax Update Quick and Dirty Iowa Tax Reform Plan.

 

Rapper “Fat Joe” reports to prison to serve a four-month tax crime sentence. (TMZ.com)

TaxProf,  The IRS Scandal, Day 110

Roberton Williams,  Honey, I Shrunk the AMT (But It’s Not Gone) (TaxVox):

So the AMT lives on, complicating the tax returns of more Americans every year. For many, it will come as a nasty surprise: new AMT taxpayers often learn about the bonus tax only when a letter from the IRS tells them they owe extra tax plus interest and possibly penalties. 

The AMT amounts to a big lie.  They pretend to give you a tax break, but then AMT makes it go away.

 

Jeremy Scott, Cruz’s Push to Defund Obamacare Could Derail Tax Reform (Tax Analysts Blog)

TaxGrrrl, IRS To Michael Jackson’s Estate: Who’s Bad?   A $700 million estate tax battle.

Paul Neiffer,  Installment Sale Update, clarifying the application of the Obamacare Net Investment Income Tax on active farmers.

Kay Bell, Spaniards hot under collar after government taxes the sun 

Me, Charity may begin at home, but not with the down payment.  A “down payment assistance” outfit comes to grief in Tax Court.

 

News you can use.  Open Atheists Already Collect Tax-Free Clergy Housing Allowances  (Peter Reilly)

Career tips: Partners Hate Nothing More Than Employees Skipping Training Because They’re Working, Nursing a Hangover (Going Concern)  It’s a good thing we don’t have national training at our firm!

 

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Tax Roundup, 8/15/2013: Turning on the revenue cameras honestly. And mink cashmere capes!

Thursday, August 15th, 2013 by Joe Kristan


gatso
But I thought it was about safety, not money.  
 The Des Moines Register reports:

The Clive City Council today is likely to reactivate its dormant red-light camera program, but only through June 30, 2014.

In his email, Weaver said it was necessary to reactivate the cameras to ensure the city’s financial health. But tonight’s vote, he wrote, will also set in motion the dismantling next year of the camera contract and of the city ordinance authorizing the use of red-light cameras in Clive.

Give them credit for being honest, at least, rather than insulting our intelligence by saying it’s about safety.

 

Chicago Congressmen’s wife gets 12 months on tax charges.  At the same hearing where her husband, former Congressman Jesse Jackson Jr., received a 30-month prison term for using $750,000 in campaign funds to live the good life, Sandri Jackson received a 12-month sentence on related tax charges.  Huffington Post reports:

Jackson’s wife, Sandra, was also sentenced Wednesday. She will serve one year in prison and was ordered to pay $22,000 in restitution, after pleading guilty to a related charge of filing false tax returns. U.S. District Court Judge Amy Berman Jackson, who is not related to the Jacksons, allowed the couple to stagger their sentences so their children would have at least one parent at all times. Jackson Jr. will go to prison first, followed by Sandra.

Jackson Jr. pleaded guilty in February to using campaign funds to purchase an array of personal items, including Bruce Lee memorabilia, a $43,000 Rolex watch and a mink cashmere cape.

A mink cashmere cape?  Considering that the Congressman was elected as a Democrat in a district that hasn’t elected a Republican since the last mastodons moved out, I suppose he had to do something with the money.  I’m glad he used it to build a modest and dignified wardrobe.

TaxGrrrl has more.

 

Missed your S corporation deadline?  The IRS has issued a new Revenue Procedure that S-Sidewalkcombines in one place relief late or missed elections related to S corporation status.  From Revenue Procedure 2013-30, which takes effect September 30:

This revenue procedure expands and consolidates relief provisions included in prior revenue procedures that provide a simplified method for taxpayers to request relief for late S corporation elections, ESBT elections, QSST elections, QSub elections, and corporate classification elections intended to be effective on the same date as the S corporation election for the entity.

These relief provisions, which require no user fee, are a great friend to the taxpayer and the practitioner.  Still, it unfortunately continues the “reasonable cause” requirement, usually requiring some advisor to take one for the team.  Fortunately the IRS doesn’t seem to look at the reasonable cause disclosures very closely.

 

Speaking of S corporations:  S Election For Cash Basis C Corporation Fraught With Peril  (Peter Reilly).  The accumulated accrual-to-cash benefit is a built-in gain, taxable to the coproration.  From Peter’s post:

The only scenario I have been able to think of that might make it worthwhile to organize a professional practice as a C corporation is a sole practitioner who has the need to make very large out-of-pocket medical payments – a special school for a disabled child for example.  That would make a medical reimbursement plan worthwhile. 

And as Peter’s post illustrates, C corporations can be like lobster traps: easy to get into, difficult to live in, and painful to get out of. (apologies to Bittker and Eustice).

 

#Tax Justice Blog,  ITEP to Legislators: Business Tax Breaks Don’t Live Up to the Hype.  Of course they don’t.  They only exist to allow politicians to call a press conference or cut a ribbon.  From the post:

Among the reasons ITEP urged lawmakers to be skeptical of these special breaks:

  • Tax incentives often reward companies for hiring decisions or investments they would have made anyway. These “windfall” benefits significantly reduce the cost-effectiveness of every tax incentive.
  • State economies are closely interconnected, so the taxpayer dollars given to companies through incentive programs never remain in-state for very long.
  • Tax incentives require picking winners and losers. Incentive-fueled growth at one business usually comes at the expense of losses at other businesses – including businesses located in the same state.
  • Tax incentives must be paid for somehow, and state economies are likely to suffer if that means skimping on public services like education and infrastructure that are fundamental to a strong economy.

Exactly right.  It’s like taking your wife’s purse to the bar for money to pick up girls.  It’s not a great use of the money, the girls aren’t impressed, and any you get that way aren’t likely to be prizes.

Christopher Bergin, 15 Years of IRS Reform (Tax Analysts Blog):

Certainly, the IRS needs reforming, and has done some pretty bad stuff. That reform can come from within the agency or from lawmakers, but it needs to come from another place as well: a good place, a place of positive change not negative political expedience.

It’s hard to elicit “positive” thoughts for the IRS from legislators when it is clear that the agency was harassing their allies.

 

Kay Bell,  Unemployed? You still could face tax issues.  Unemployment comp is still taxable income.

Robert D. Flach,  DEFENDING THE DEDUCTIONS FOR TAXES AND MORTGAGE INTEREST.

David Shakow, The Taxation of Cloud Computing and Digital Content.   (Tax Analysts, via The TaxProf.  The rise of software-as-a-service creates a lot of challenges for the tax man.

TaxProf, The IRS Scandal, Day 98.

Cara Griffith, California’s Aggressive Position on Passive Income (Tax Analysts Blog)

 

Jason Dinesen,  Baseball and “Games Behind in the Loss Column”  For us Cubs fans, it’s an exercise in large numbers.

 

TaxGrrrl,  ‘Real Housewives’ Stars Plead Not Guilty As Bethenny Claims: I Don’t Feel Sorry For Them.   In case that matters.

The Critical Question. What’s Getting a PhD in Accounting Really All About? (Going Concern).  As far as I can tell, it’s about learning statistical techniques and writing things nobody will read over a long-enough time that you will forget any useful information you might have imparted to students from your pre-Ph.D career.  More importantly, it’s about restricting the pool of tenure-eligible candidates to maintain the salaries of the guild members.

News you can use.  E- Filing makes tax fraud easier (Myfoxhouston.com)

 

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The perils of an unorthodox approach to tax crime explained.

Wednesday, August 14th, 2013 by Joe Kristan

Miles J. Julison may need to re-read the tax criminal mastermind handbook, based on this Oregonian story.  A condensed timeline drawn from the story shows some rookie mistakes:

July 2008:  Taxpayer files a 2007 1040 showing $bureauofprisons583,151 in “other income” and the same amount as tax withheld.  From the story:

He claimed he was owed a refund of $411,773 based on these amounts, and the IRS mailed Julison a check for that amount.

Prosecutors say he used the money to pay $101,997 toward a home loan, $62,000 for a Mercedes-Benz, and $58,656 toward credit card bills. He also bought a boat.

Some internal controls you have there, IRS.  Nothing suspicious about that filing, eh?

October 2008: 

…for reasons that still baffle prosecutors, Julison walked into the criminal investigation division of the Portland IRS office to talk to federal agents.

“During this conversation, Julison stated several standard tax protestor/sovereign citizen positions,” prosecutors wrote in a trial brief. 

I don’t think consulting with criminal investigators who have yet to contact you is considered standard master criminal procedure.

January 2009: Not content to wait for his refund this time, he files a 2008 1040 showing interest income of $2.3 million and claiming a $1.5 million refund.  Alert readers may by now recognize this as the absurd 1099-OID “redemption” scam, based on the idea that the government is sitting on a bunch of money for each of us, waiting for our 1099-OID refund claims.

March 2009: 

…two IRS agents told Julison he was under criminal investigation. He responded by giving them a long interview to explain how he had prepared his 2007 and 2008 tax returns.

I believe exercising Fifth Amendment rights and engaging legal counsel is a more conventional approach in such situations.

The indictment soon followed.  Mr. Julison declined counsel, and the predictable conviction ensued.  Perhaps Mr. Julison never believed he was in real trouble, based on his behavior after he was found guilty:

Julison, who calls himself “a bond servant of Jesus Christ,” said he did not recognize the jurisdiction of Simon’s court. But he seemed to appreciate the two muscular deputy marshals who approached him with handcuffs. He went peacefully from the court wearing a dark, neatly tailored business suit.

Pro tip:  No matter how much you are convinced that the judge has no jurisdiction over you, it does you no good when the IRS, the appeals courts, the Federal Marshals and the Bureau of Prisons think otherwise.

 

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Tax Roundup, 8/12/2013: Good intentions edition. And the mysteriously-lucrative profession of German toilet attendant.

Monday, August 12th, 2013 by Joe Kristan

Good intentions don’t always mean good results.  That’s one of the lessons in Michael Schuyler’s post  Evaluating the Growth Effect of the Earned Income Credit at the Tax Policy Blog:

The Tax Foundation study concluded that while the EIC raises the incomes f low-income workers, its net result is to reduce both national output and total hours worked.  This result may seem surprising because the credit creates a strong incentive for workers with very low incomes who are within the EIC’s phase-in range to work more since each extra dollar of earnings brings a larger credit.  Unfortunately, for the larger number of low-to-middle income workers who are within the EIC’s phase-out zone, the loss of benefits with rising earnings generates a powerful deterrent against additional work effort.

 That “deterrent effect” results from the high hidden marginal tax rate on income in the EIC phaseout range:
The EITC as a poverty trap: phaseouts of the benefit impose stiff marginal tax rates on the working poor.

The EITC as a poverty trap: phaseouts of the benefit impose stiff marginal tax rates on the working poor.

The credit was invented with the worthy intention of encouraging those with the lowest incomes to find work, but it has the unintended, though predictable, effect of discouraging those who already have jobs from moving up.  It does, however, have a fine stimulative effect on grifters, as up to 25% of the credit is issued improperly (examples here and here).

 

IRS, Disclosure Authorization and Electronic Account Resolution retirement delayed three weeks.  It’s nice of them to delay making it harder for tax pros to resolve client problems.

  

Richard Doak, Salesman in Chief: Governors today focus on handing out tax ‘incentives’:

In the early days of the Republic, many states got burned by canal-building schemes and other enterprises that well-connected corporations talked state governments into financing.

By the time the Iowa constitutions were written, in 1846 and 1857, people had become wary of states getting involved with corporations. Hence the restrictions such as those in the Iowa Constitution.

Today, the restrictions are easily gotten around, and the spirit of state-corporate separation expressed in the Constitution is ignored as government rushes into entanglements.

Politicians will sell their souls for a mess of ribbon cuttings and press releases.

 

Megan McArdle, Fixing the Mandate From Hell:

I’m kind of surprised to hear a lot of liberals agree that the 30-hour rule is bad policy, and even more surprised to hear that it would be easy to repeal or reform. In fact, while I opposed the law, I find it easy to see why they designed an employer mandate for all employers who worked more than 30 hours, and difficult to imagine how it could be reformed.

Welcome to the brave new world of 29-hour per week jobs.

 

Brian Strahle,  FEAR AND UNCERTAINTY:  ARE YOU PLAYING THE “WAIT AND SEE” GAME?  “In the world of state taxes, companies are faced with vast amounts of
‘uncertainty’ when applying multiple state rules that lack conformity to  their company’s situation.”  I don’t think you need to qualify the uncertainty with scare quotes.

TaxProf, The IRS Scandal, Day 95

Kay Bell, New York cop pleads guilty to identity theft, tax refund fraud

Jack Townsend, Is It the Defendant’s Burden to Prove Good Faith As a Defense to Willfulness?

Peter Reilly,  Windsor As A Precedent – Much More Than Taxes

TaxGrrrl, IRS Releases List Of Americans Hoping To Expatriate, Number Tops 1,000

Russ Fox, Once Again, Registration of a Tax Preparer Doesn’t Stop Him from Bad Behavior.   Tax preparer regulation just gives the bad ones a government seal of approval.

 

Look on the bright side! AICPA to CPA Exam Candidates: Hey, at Least You Don’t Have Kidney Stones! (Going Concern)

Flushing out tax crime.   Toilet attendant who kept £35,000 in loose change she made from tips faces tax evasion charges in Germany after investigators discover 1.4 tonne pile of coins in her garage (London Daily Mail).

It sounds like she was some sort of bathroom boss:

The website reported how the woman would drive to a number of toilets across the country in her Mercedes collecting the money.

Police started investigating the woman after she fell out with an employee.

Officers were called to one of the toilets after the pair started fighting but they later opened investigations into how the company was run after suspicions were raised.

It’s the price they pay, apparently, for not having savage unsupervised bathrooms like we deal with here.
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Tax Roundup, 8/1/2013: Sales tax holiday! And bidding for tax trouble.

Thursday, August 1st, 2013 by Joe Kristan

 

Flickr image courtisey gaudiramane under Creative Commons license

Flickr image courtesy gaudiramane under Creative Commons license

Iowa sales tax holiday!  The silly Iowa sales tax holiday for clothes is tomorrow and Saturday.  From the Iowa Department of Revenue website:

  • Exemption period: from 12:01 a.m., August 2, 2013, through midnight, August 3, 2013.
  • No sales tax, including local option sales tax, will be collected on sales of an article of clothing or footwear having a selling price less than $100.00.
  • The exemption does not apply in any way to the price of an item selling for $100.00 or more
  • The exemption applies to each article priced under $100.00 regardless of how many items are sold on the same invoice to a customer

While it is touted as a “back to school” holiday, there is no classroom requirement.

Sales tax holidays are silly gimmicks and bad tax policy.  Yet if you are a careful shopper, you can save on a new outfit in Iowa and take it to Louisiana for their September 6-8 sales tax holiday on firearms.

Links:

Cara Griffith, Back-to-School! Time for a Holiday (Tax Analysts blog)

Kay Bell, 12 states have sales tax holidays this weekend

Details on Iowa’s sales tax holiday

Map of U.S sales tax holidays.

 

Going, going, gone.  An Iowa auctioneer was sentenced to 48 months in prison this week after pleading guildy to tax fraud and social security fraud, reports WOWT.com:

Fifty-five-year-old Robert Duncan was sentenced by U.S. District court judge John Jarvey after entering a guilty plea. That plea came back in March.

Duncan admitted to defrauding the SSA, filing a false income tax return and making a false statement to a financial institution.

The former owner and auctioneer for Bob Duncan and Associates, was also ordered to pay restitution to the Social Security Administration in the amount of $218,755.10, and to the Internal Revenue Service in the amount of $42,254.00.

Not good.

 

The IRS did nothing wrong, and besides they did it to lefties too!  That has been one line of argument by the “nothing to see here” folks who pooh-pooh the IRS harassment of Tea Party groups.   Now NPR, not known as a friend of the Tea Party, has run the numbers, and it looks like… the IRS harassed conservative outfits, and pretty much left the left side alone:

 7-30-13-irs-targeting-statistics-of-files-produced-by-irs-through-july-29-2-

Nothing to see here, move along…  For example, Ways and Means–still distracting with false scandals (Linda Beale).

Other coverage:

TaxProf, The IRS Scandal, Day 84.

Sioux City Journal, Iowa-based group at center of new IRS accusations

 

Tax Justice Blog, What the President Really Said about Business Tax Reform:

What the President just proposed is not much different from his previous proposals.

That’s the problem.

William McBride, Obama’s Grand Bargain a Roundabout Way to Raise Corporate Taxes (Tax Policy Blog)

William Perez, Some Senators Release Their Blank Slate Tax Reform Ideas

Jim Maule,  Polishing Subchapter K: Part I.  Prof. Maule has some ideas for partnership taxation.

 

Tax Trials, Tax Court Reasserts Position on Conservation Easements

Missouri Tax Guy, Business Structures, Choosing your Entity

                                                              

Peter Reilly, North Carolina Declares Cash Register Zappers Contraband .  The government doesn’t like skimming software.

Robert D. Flach has some thoughts on THE IRS AND NJDOT WEBSITES

 

Tony Nitti, MLB Trade Deadline Winners And Losers: The Tax Edition.  Through no fault of his own, Bud Norris goes from income tax-free Texas to high-tax Maryland.  On the positive side, he won’t be playing for the Astros any more.

Tracy Gordon, Detroit’s Pension Blues, and America’s (TaxVox)  Defined benefit pensions for public employees should be outlawed, and their assets converted to defined contribution plans.

The Critical Question: Were ‘Real Housewives’ Stars Targeted For Prosecution Because Of Their Celebrity?  (TaxGrrrl).  If you are going to cheat on your taxes, it may be wise to not put your life on television.

 

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Tax Roundup, 7/29/2013: If the embezzler had used the money for figurines, would they sue Precious Moments?

Monday, July 29th, 2013 by Joe Kristan

20130729-1Blame the casino for the thief?  A Nebraska business may be taking an oddly-forgiving view towards employee theft.  The Associated Press reports that the Colombo Candy and Tobacco Wholesale Company (now there’s a product combo for everyone) declined to press charges against a former employee for allegedly stealing $4.1 million.  Instead they are suing a Casino for leading her unto temptation.

But the Nebraska Department of Revenue is less willing to let bygones be bygones, reports KETV.com:

The Nebraska Department of Revenue and the Sarpy County attorney have decided to pursue criminal charges against 54-year-old Caroline Richardson of Gretna.

Sarpy County Attorney Lee Polikov said this is a case he doesn’t see every day.

“I think it’s interesting for people to know that stolen money is considered income and has to be reported on your income tax,” Polikov said.  “If you don’t report it and don’t pay it, you’ll be prosecuted for it.”

In a civil filing where Richardson is identified as “Jane Doe,” Colombo Candy argued the blame should be less on Richardson and more on an Iowa Casino.

A more cynical view would be that the candy company knows that the accused thief has no money, so it’s going for the deep pockets.

 

Paul Neiffer, Help Prevent SE tax on CRP Rents!  Paul wants CRP recipients to help fund an appeal of the recent Tax Court Morehouse case, holding CRP income to be self-employment income.

The Morehouse case needs be appealed because the case sets a bad precedent for all owners of CRP across the country. Anyone who fails to treat CRP as self-employment income is subject to penalty for underpayment of Federal tax.

However, appeals cost money, and the dollars at risk for Morehouse personally (only $6,000) just aren’t enough for him to justify paying for the appeal. It is important enough that I want to spread the word, and request my readers who have ground in CRP to share in the cost.

If you have CRP ground and want to help the cause, Paul tells you how.

 

TaxGrrrl, Bolt Strikes At Diamond League Games, Says UK Races Hinge On Tax Laws 

Usain Bolt said he wouldn’t race in the U.K. after the Olympics unless they changed their tax laws… and they did, extending the laws in place for the Olympics for the Diamond Games.

Tough luck if you aren’t famous, I guess.

 

Phil Hodgen is launching Web-Based Seminar: U.S. Tax Solutions for Non-Filers Abroad.  It looks like a great resource for the innocents abroad caught up in the FBAR fiasco.

 

Jack Townsend,  Must a Defendant Prove Innocence of Uncharged Crime to Reverse Wrongful Conviction?  That’s insane.

TaxProf, The IRS Scandal, Day 81.  They’ll keep calling it a “phoney” scandal, but the Inspector General still says otherwise.  So did the President, until it became awkward.

Instapundit:

JACK LEW:  There’s No IRS Scandal, But I Won’t Say Whether I Talked To Wilkins About Targeting.

Those who keep saying there’s no scandal here need to acknowledge that the IRS admitted targeting conservative groups months ago.

 

Kay Bell, Scholarships and grants get better grades than borrowing and tax breaks as ways to pay college costs

William Perez, IRS Update for July 26, 2013

 

Joseph Henchman, Massachusetts to Have Second Highest Cigarette Tax, Rare Tax on Computer Services, Higher Gas Tax (Tax Policy Blog)

Brian Strahle, RECENT CALIFORNIA LLC FEE ISSUES AND WARNING FOR NONFILERS:  HERE COMES THE NOTICE!!  California is looking for nickels under your sofa cushions.

 

Christopher Bergin, Our Secretive Senate. (Tax Analysts Blog).  Not a fan of the 50-year memory hole for tax reform ideas.

Peter Reilly, Why Tax Reform Is Impossible

 

Jim Maule, Tax Law and National Defense: Hush Now!

Linda Beale, Proposals for Cutting the IRS Budget.

 

Janet Novack, U.S. Seeks PNC, Wells Fargo, JP Morgan Records To Find Tax Cheats–From Norway   Look out, Decorah.

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Tax Roundup, 7/25/2013: Mo’ refundable credits, mo’ fraud. Plus cigarettes and preschoolers!

Thursday, July 25th, 2013 by Joe Kristan

momoneyRefundable tax credits are a magnet fo’ mo’ fraud.  Five from Mo’ Money tax prep office in St. Louis arrested in scheme (St. Louis Post-Dispatch):

Mo’ Money franchise owner Jimi Clark, 57, of Memphis, Tenn., abused the American Opportunity Credit to attract and keep clients, prosecutors said. They filed for the credit on at least 47 returns where the taxpayer had not incurred any educational expenses, and unwisely, claimed the same amount of educational expenses, $3,765, on the “vast majority” of the returns, their indictment says.

In all, the 47 returns claimed more than $50,000 in educational credits.

Maybe 25% of the rundable Earned Income Tax Credit is paid improperly.  Yet legislators ignore how the credits actually work because they like them in theory.

 

Bankrupt state pays people to be friends. Illlinois governor to sign deal to lure fertilizer plant (Sioux City Journal)

Speaking of Bankrupt… Detroit Taxes and the Laffer Curve (Alex Tabarrok):

  • [The] per capita tax burden on City residents is the highest in Michigan. This tax burden is particularly severe because it is imposed on a population that has relatively low levels of per capita income.
  • The City’s income tax… is the highest in Michigan.
  • Detroit residents pay the highest total property tax rates (inclusive of property taxes paid to all overlapping jurisdictions; e.g., the City, the State, Wayne County) of those paid by residents of Michigan cities having a population over 50,000.
  • Detroit is the only city in Michigan that levies an excise tax on utility users (at a rate of 5%).

Sometimes you can’t solve the problem with more taxes.

 

Robert D. Flach, DEDUCTING CAPITAL LOSSES

Tony Nitti, Q&A: How Can An Accrual Basis Business Defer Revenue When It Receives Cash In Advance?

Phil Hodgen, Nonfilers–voluntary disclosure is not your only choice:

But my opinion is that the official program is fabulous for someone who is in deep trouble and might otherwise face a spot of prison time.  For that person, the “Your money or your life!” demand from the IRS is easy to answer.  Give ‘em your money. 

For almost everyone else, the voluntary disclosure program is stupidly expensive–in tax cost, penalties, interest, and professional fees to give the government all of the paperwork they want.

You gotta shoot the jaywalkers so you can slap the real crooks on the wrist.

Peter Reilly, Not Good For Real Estate Loss When Tax Court Judge Says Purports

Fiduciary Income Tax Blog, Trials and Tribulations of Nongrantor Trusts

 

 

Cara Griffith, Improving Transparency in Pennsylvania (Tax Analysts Blog)

TaxProf, The IRS Scandal, Day 77

Howard Gleckman, The OECD’s International Tax Plan: The First Step on a Long Road (TaxVox)

Tax Justice Blog, CTJ Presents the Nuts & Bolts of Corporate Tax Reform

Linda Beale, Senators promised 50 years of secrecy on their tax reform proposals

Daniel Shaviro, What is a “tax expenditure” and when does this matter?

 

TaxGrrrl,  Louisiana To Offer ‘Fresh Start’ Tax Amnesty Program.  I’m sure this time they really mean this is the last one.

Missouri Tax Guy, The Enrolled Agent, EA

Jack Townsend, Fourth Circuit Holds Defendant to His Tax Loss Stipulated in the Plea Agreement

Kay Bell, Summer 2013 sales tax holidays begin this weekend

William Perez, Sales Tax Holidays in 2013

                                                              

Quotable: (my emphasis)

The manufacturing innovation institute, meanwhile, is just another iteration of an idea that’s been around for longer than Barack Obama has. Go to any Rust Belt city and you’ll find research campuses, innovation institutes and similar institutions named after hopeful politicians who promised that a new manufacturing base would coalesce around this exciting agglomeration of creative minds. Unfortunately, in most instances it has turned out that manufacturing bases would rather coalesce around cheap land, low taxes and acres of uncongested freeway.

-Megan McArdle, “Obama’s Speech Is a Confession of Impotence

 

I think one judge will think otherwise. Three South Dakota men say income taxes don’t apply to them (Argus-Leader.com)

Tax Court Judge Holmes has a new opinion out.  Always entertaining and enlightening.

News you can use:  No Such Thing as Free Swag (Austin John, Elizabeth Malm, Tax Policy Blog).  Sorry, ESPY winners.

More harebrained than what they do anyway? U.S. Senators with Harebrained Tax Reform Ideas Offered an Opportunity (Going Concern)

Maybe not where you grew up. Cigarettes and Preschoolers Don’t Go Together (Scott Drenkard, Noah Glyn, Tax Policy Blog)

 

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Tax Roundup, 7/22/2013: More fertilizer! And how to finance your party, the tax grifter way.

Monday, July 22nd, 2013 by Joe Kristan
Via Wikipedia

Via Wikipedia

More taxpayer fertilizer.  Iowa board OKs additional $25M in tax credits for Orascom.  (Quad Cities Times):

The unanimous vote by the board on Friday makes a total of $82.5 million in state tax credit benefits available to Orascom Construction, parent of the Iowa Fertilizer Company.

The $1.8 billion plant is expected to employ as many as 165 workers when completed.

In case you’re wondering, that’s about $500,000 per “permanent job.”  That assumes that the money is actually buying jobs, but the plant almost certainly was going to be built in Iowa without the subsidies.  The $82.5 million only buys politicians press conferences, ribbon cuttings and silver souvenir shovels, with our money.

 

TaxProf, Faber:  ‘Ivory Tower’ Economists Are Wrong: Taxes Play Major Role in Wealthy Fleeing High-Tax States:

Amy Hanauer and Tim Krueger argue that taxes play no role in taxpayer decisions to move from one state to another (The Tax Flight Myth: People Move for Jobs and Family, Not Taxes,  State Tax Notes, July 8, 2013, p. 97 … ). Their conclusions are apparently based on empirical studies and computer models. They are wrong. Based on my experience as a practitioner who works with wealthy individuals and corporations every day, I can assure you that taxes often play a major role in these decisions and that in many cases, they are the sole reason for the move.

That’s right, in my experience.  Taxpayers absolutely take taxes into account when they move, even if it’s hard to isolate in aggregate data.  Tax aren’t everything, but they are definitely something.

Kim Reuben, Detroit’s bankruptcy: What does it mean for other cities? (TaxVox)

Russ Fox, The Flow of AGI from One State to Another

 

Jason Dinesen, Tax Aspects of Renting Your Home for a Day or Two.  Taking in RAGRAI riders can give you some tax-free income.

Robert D. Flach, KEEPING A CONTEMPORANEOUS MILEAGE LOG.  If you want to deduct your mileage, you need to keep your log up to date.

 

Tyler Cowen, Wealth Taxes: A Future Battleground.  Just another way for politicians to cover their profligacy.  Via Arnold Kling, who has more.

TaxGrrrl, Rather Than Tackle Tough Tax Reform, Congress Focuses On The Death Tax. Again.

Kay Bell, The U.S. tax system is not very attractive

William McBride, American Corporations Losing Ground (Tax Policy Blog):

The U.S. corporate tax is the most punitive in the developed world, not just because the statutory corporate tax rate is the highest but also because the effective corporate tax rate is the highest or nearly the highest according to recent studies

TaxProf, The IRS Scandal, Day 74.

 

Tax offender of the year nominee.  I no longer choose a Taxpayer of the Year, but Russ Fox still “honors” a “tax offender of the year.”  I hope he will consider Ayawna Webster, former president of the D.C. Young Democrats and staff aide to a D.C. City Council Member, Harry Thomoas Jr.  The Washington Post reports:

The former chief of staff to one-time D.C. council member Harry Thomas Jr. pleaded guilty Friday to falsifying tax documents in connection with payments for a 2009 political ball…

 According to court documents, [non-profit chief Millicent] West worked with Thomas and Webster to send trust money intended to pay for youth programs to help cover the cost of the party.

Just when you think politicians can’t come up with ways to make you think less of them, they come through.  Looting a fund for poor kids to pay for a “political ball” is notably evil.

 

Brian Mahany, Business Owner Pleads to Hiding Offshore Account

Jack Townsend, Liechtenstein Bank In U.S. Cross-Hairs

 

A video report on Rashia Wilson’s sentencing

She had a sixth-grade education and stole millions from the taxpayers.  When that can happen — over and 0ver – there just may be a problem with IRS controls over refunds.

 

The Critical Question.  Lap Dance Tax?  (Jim Maule)

News you can use.  The Data on Bar Fights (Freakonomics Blog)

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Tax Roundup, 7/19/2013: You can run a red light edition. And saving the republic, one tail light at a time.

Friday, July 19th, 2013 by Joe Kristan

gatsoThe first central Iowa town to install revenue cameras has turned them off.  The Des Moines Register reports:

 The Clive City Council on Thursday night voted to discontinue the use of red-light cameras to enforce traffic violations.

The council voted 3-2 to reject a contract with Redflex Traffic Systems Inc., which has provided the city red-light camera service since the program began in 2006. The nine cameras positioned along Hickman Road now will no longer be in service.

So carnage on Hickman Road, now, right?  Yeah, right.  But it’s not over yet:

Mayor Scott Cirksena said after the meeting that city staff would work to reach an agreement with the camera provider that could gather a majority vote.

Council members Ted Weaver and Michael McCoy said they would like to see the city wean itself away from using red-light revenue for general fund expenditures. City Manager Dennis Henderson said the city expects the red-light camera program to bring in approximately $700,000 during the current fiscal year, which began July 1

It’s obviously about the money, though you find the pro-forma claims that ticketing people who don’t quite stop when making a right turn on red at an empty intersection makes us all safer, if you read down to paragraph nine.  Let’s hope Des Moines and Polk County follow suit, but don’t hold your breath.

 

 

Of course they do.  Four Cedar Rapids-Metro Area Mayors Support Local Option Sales Tax Extension (KCRG.com). And RAGBRAI riders support free beer extension.

 

I bet the IRS heard about this guy through the grapevine.  From Star-Telegram.com:

Larry Lake, part owner of Grapevine Drug Mart, and his son, Travis Lake, who managed the drug store, each failed to report income on their federal tax returns, according to a news release from the U.S. Attorney’s office.

Larry Lake was sentenced to 14 years in prison and ordered to pay a $550,000 fine as well as taxes, interest and penalties, which equal about $25 million, the release said.

The Texas men may well have gotten in trouble not just from evading taxes, but from the way they did their banking:

From August 2006 to November 2009, Larry Lake and his spouse, Kathy Lake, agreed to structure hundreds of currency deposits into at least 13 bank accounts, according to a federal indictment. The couple created at least two shell companies that were used to open up the accounts involved in the structuring scheme, which amounted to $9.3 million, federal officials said.

“Structuring” involves breaking cash deposits up into amounts under $10,000 to avoid the rules requiring banks to report currency transactions.  But banks are also required to report if it looks suspiciously like somebody is trying to get around the $10,000 reporting rule.  You come into a bank enough times with wads of cash, but never $10,000, and the tellers will remember you.

 

TaxProf, The IRS Scandal, Day 71.  A bad day for the “nothing to see here” folks.

Robert W. Wood, IRS Inspector Shellacs Oversight Committee About Tea Party Scandal

 

Kay Bell, Tax reform’s chances are better than 50 percent:

Rep. Dave Camp (R-Mich.), head of the Houses Ways and Means Committee, and Sen. Max Baucus (D-Mont.), leader of the Senate Finance Committee, each put the possibility of tax reform passage at greater than 50 percent.

The gung-ho comments were made during an appearance today at the Economic Club of Washington.

I’d agree, if you are talking about in the time before the sun curls into a cold cinder.  If you are talking about this Congress, I’ll bet the other way.

Kyle Pomerleau, Japan to Lower its Corporate Rate Further? (Tax Policy Blog)

David Cay Johnston, More Tax Dollars There, Not Here (Tax Analysts Blog)

 

Jason Dinesen, Patient-Centered Outcomes Trust Fund Fee – An Exercise in Bureaucratic Futility $100 of cost to compute a $3 tax.

Peter Reilly, Real Estate Pro Status Does Not Mix With Full Time Day Job.   Back from the Civil War, Peter has been busy with new tax posts.  This one explains the difficulty of being a “real estate professional” when you have other work.

 

Sean Raisch,  Medicare Taxes on High Earners (Davis Brown Tax Law Blog)

William Perez, IRS Update for July 19, 2013.  Sort of a web weekly bulletin of IRS releases.

 

Greg Mankiw, The Changing Distribution of Income:

20130719-1

Mark Perry points out:  “Yes, the middle class has been disappearing, but they haven’t fallen into the lower class, they’ve risen into the upper class.”

It’s Friday, so it’s Buzz Day at Robert D. Flach’s place!

 

The Critical Question:  Do Low-Income Taxpayers Cheat? (TaxVox)  He has a lot more faith in the good nature of humankind than I do.

 

TaxGrrrl, How To Stay Out Of Jail: Lessons Learned From The ‘Queen Of IRS Tax Fraud’:

If you do steal, and you talk about it, don’t do it on Facebook I don’t care what you think you know about privacy settings, when you put something out there on Twitter or on Facebook, it’s not protected. As a taxpayer, that means you should avoid posting personally identifying information like tax ID numbers and your address (the IRS Facebook page won’t allow you to post comments for that reason). And you should certainly avoid posting photos of yourself surrounded by stacks of cash with such gems as:

20130717-1

Hard to argue with that advice.  Russ Fox has more.

 

Nude drunk guy saves the republic. Police: Drunk naked man broke out car tail lights (press-citizen.com, via The Beanwalker):

According to the complaint, Flaherty broke out the tail lights to three cars and told officers that he was breaking the red in the tail lights because red means danger to the republic.

I’ll have what he’s having.

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Tax Roundup, 7/18/2013: Cincinnati, D.C. edition. And: the Redflex auto dealer tax.

Thursday, July 18th, 2013 by Joe Kristan

chief counsel shieldI didn’t know the IRS Chief Counsel worked out of Cincinnati.  The “nothing to see here” apologists for the IRS harassment of right-wing exempt organizations have always said that nothing wrong happened, and it was the work of rogue employees in the Cincinnati hinterlands anyway.  Perhaps not.  Tax Analysts reports ($link):

Embattled IRS official Lois Lerner directed a multilayered review of Tea  Party groups’ exemption applications that reached all the way to the IRS chief counsel’s office and led to lengthy delays in processing the applications, according to testimony from an IRS attorney released July 17 by House committees investigating the matter.

Carter Hull, a “Washinton IRS tax law specialist,” says the IRS Chief Counsel’s office was involved:

     Hull testified that at the August 2011 meeting, officials from the chief counsel’s office told him they needed updated information on the applications and suggested that a template letter be developed for future processing of applications. He said he told the officials that a template was impractical given the differences in the various applications.

     Hull told investigators that in his 48 years working at the IRS, he had never been asked to send a case he was working to Lerner’s senior adviser or to the chief counsel’s office before he received the request to elevate the Tea Party cases.

Mr. Hull is scheduled to testify at Congressional hearings today.  Nothing to see here, move along.

Wall Street Journal, The IRS Goes to Washington.

 

It’s OK, she’s a witch anyway.  Failed Republican Senate Candidate Christine O’Donnell may have been one of the candidates for political office whose tax records were breached, based on a Washington Times story.  The report says Ms. O’Donnell has been contacted by the Treasury telling her that a Delaware state official improperly accessed her federal tax records.   During her campaign for Senate, she was hit with a false federal tax lien on the day she announced her candidacy.

There has been no prosecution for the illegal access:

Treasury officials have refused to give Mr. Grassley any specifics on the cases or to describe the disposition of Ms. O’Donnell’s case, claiming even people who improperly access tax records have an assumption of privacy under federal tax laws.

That will be news to Dennis Lerner, a former IRS agent who this week received a three-year probation sentence for improperly disclosing confidential tax information.

Instapundit has more.

Christopher Bergin, IRS: Victim, Football, Both? (Tax Analysts Blog)


 

gatsoClive reconsidering its revenue camera auto-dealer tax.  The Des Moines Register reports that the future of the Des Moines suburb’s contract with red-light camera operator Redflex is in doubt, now that City Councilman Michael McCoy has joined another member of the five-person council in opposing the cameras.

Most of the cameras are along a strip of Hickman Road that has some car dealerships.  Guess what happens?

McCoy said businesses have raised concerns about the program to him. He said car dealerships are incurring fees when customers test drive their vehicles — the program mails tickets based on license plates. “That doesn’t seem like a way to be business friendly and invite new business into our community,” McCoy said.

But what good are customers if the local municipality can’t pick their pockets?

 

Tax Justice Blog, Are Special Tax Breaks Worthwhile? Rhode Island Intends to Find Out:

Rhode Island is about to put seventeen of its “economic development” tax breaks under the microscope, thanks to a new law (PDF) signed by Governor Chafee last week.  This reform is a welcome step forward in a national landscape where states often do nothing at all to figure out whether narrow tax breaks are really helping their economies.

After Iowa’s film tax program collapsed in disgrace and scandal, a blue ribbon commission was unable to identify any definite benefit to Iowa’s dozens of targeted corporate welfare tax breaks.  Yet Iowa continues to pass them out like Tootsie Rolls at a parade.

 

Cara Griffith, Break Out the Champagne (Tax Analysts Blog).  State revenues are up.

Jack Townsend, Interview of Swiss Bank Whistleblower

Kay Bell, Werfel does his own tax returns, Lerner still under fire and other tidbits from House hearing on IRS small business audits

Me: Long live the Queen! 21 years for the “Queen of IRS Tax Fraud”

 

Mitch Maahs, Deducting Job Search Expenses (Davis Brown Tax Law Blog)

William Perez, Same-Sex Spouses and Small Business: What’s Changed?

 

‘Merica!  U.S. Tax System Ranks 94th in the World (Andrew Lundeen, Tax Policy Blog)

Career Corner.  If All Else Fails, You Can Still Become an Internal Auditor (Going Concern)

News you can use.  Get Ready To Shop: State Sales Tax Holidays Are Back! (TaxGrrrl)

Reports: he’s not happy any more. Reports: Happy’s Pizza founder, others indicted for fraud, tax evasion (theoaklandpress.com)

 

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Long live the Queen!

Thursday, July 18th, 2013 by Joe Kristan

20130717-1The Facebook “Queen of IRS Tax Fraud” will need to live for a long time to get out of her new palace.  Rashia Wilson, who famously boasted on her Facebook of her fraud prowess, got a 21-year exile in federal prison yesterday in a Tampa federal courtroom.  Tampa Bay Business Journal reports:

A Tampa federal court judge sentenced Rashia Wilson, a Wimauma woman who dubbed herself the “First Lady” and “Queen of Tax Fraud,” to 21 years in prison on charges of wire fraud, aggravated identity theft and being a felon in possession of a firearm.

She also was ordered to forfeit $2.2 million, the proceeds traceable to the offenses, according to a written statement.

I have a feeling that not much of that $2.2 million will be recouped.

Ms. Wilson, perhaps imprudently, put on her Facebook:

YES I’M RASHIA THE QUEEN OF IRS TAX FRAUD.  IM’ A MILLIONAIRE FOR THE RECORD SO IF U THINK INDICTING ME WILL BE EASY IT WONT I PROMISE U!

She also posted the fetching picture in this post with some of your money.

Identity thieves like Ms. Wilson are milking the U.S. Treasury to the tune of maybe $5 billion annually.  While Rashia Wilson was buying $90,000 cars and throwing $30,000 birthday parties with your money, The Worst Commissioner Ever was leading IRS efforts to create a worthless preparer regulation bureaucracy while hassling Tea Partiers and terrorizing innocent Americans abroad.  Priorities, I guess.

Related: Jason Dinesen, Taxpayer Identity Theft — Part 17

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Tax Roundup, 7/17/2013: Stories of wounded jaywalkers. And: checking in on Rashia.

Wednesday, July 17th, 2013 by Joe Kristan

taxanalystslogoMarie Sapirie of Tax Analysts has an excellent piece about how the IRS offshore account enforcement program treats the thousands of ordinary Americans abroad — and many green card holders living in the U.S. —  as presumptive tax criminals when they try to remedy foot-fault paperwork violations in reporting offshore accounts.  She tells the stories of four “minnows” who tried to remedy inadvertent minor violations of the foreign account rules.  Get a load of the advice they gave “Taxpayer 3:”

The taxpayer, like many others, sought help from a congressional representative in reaching a satisfactory resolution with the IRS. The response that the lawmaker received from the IRS — that the taxpayer could renounce U.S. citizenship — was disappointing. “I lived in the U.S. for 30 years; I never was treated unfairly for 30 years. I was proud of it. And here the IRS is telling me to renounce my citizenship
because it may be the best solution considering my situation,” the taxpayer said.

When the IRS is telling people to expatriate themselves, something is very wrong.

The article discusses the headaches involved in clearing up FBAR reporting, including the delays caused because IRS agents aren’t allowed to make international phone calls.

The IRS should imitate programs for state non-filers for FBAR violations: allow taxpayers to come in penalty-free anytime if they file disclose their accounts and amend returns for five years back to report any unreported offshore income.  Time to stop shooting the jaywalkers.

20130717-1

Rashia Wilson in happier times.

While Doug Shulman’s IRS was busy shooting jaywalkers, the grifters were running wild.  TampaBay.com has an update on the woman who boasted on her Facebook page that she was the “queen of IRS tax fraud”: IRS loss to fraud’s ‘first lady’ may have hit $20 million:

Rashia Wilson may have duped the IRS out of as much as $20 million before her arrest on stolen identity refund fraud charges.

That’s according to a court document, filed in advance of her sentencing today, that estimates the government’s loss at $7 million to $20 million.

What kind of criminal mastermind could break through the internal controls at IRS to loot that kind of money?

“YES I’M RASHIA THE QUEEN OF IRS TAX FRAUD,” reads a May posting on her Facebook page described in the affidavits. “IM’ A MILLIONAIRE FOR THE RECORD SO IF U THINK INDICTING ME WILL BE EASY IT WONT I PROMISE U!”

Well done, Shulman!  Criminal masterminds like Ms. Wilson are robbing the Treasury of $5 billion annually, and you are busy telling taxpayers trying to come into compliance to renounce their citizenship.

Prior tax update coverage: Identity theft tax fraud: women’s work?

Jason Dinesen, Taxpayer Identity Theft — Part 16. “The IRS still has not processed Brian and Wendy’s final joint tax return for 2010.”

 

Inspector General finds “willful” rummaging through political “candidate or donor” records, but Justice Department declines to prosecute.  This is a big deal.  All we know is that it is sometime after 2006.  Failing to prosecute that is shocking; it’s hard to imagine a good excuse.  Tax Analysts reports today ($link) that IRS denies any of its employees were involved.

TaxProf, The IRS Scandal, Day 69

Kay Bell, Justice Department refusal to prosecute IRS disclosure of taxpayer information prompts inquiry from GOP Senator

Janet Novack,  Former IRS Auditor Gets Probation For Taxpayer Info Leak, Conflict Of Interest.  ”Dennis Lerner admitted disclosing information about an audit of
Commerzbank AG and seeking a job with the German bank even as he was still negotiating a $210 settlement with it.”

 

William Perez, Same Sex Marriage, the Windsor Case and Estate Planning

Paul Neiffer, Capital Gains Questions on Selling Farmland

Missouri Tax Guy, Choose your tax pro? A rundown on the difference between CPAs, Enrolled Agents and other preparers.

 

Kay Bell, IRS will be fully staffed July 22 as furlough day is canceled

TaxGrrrl, IRS To Remain Open For Business As Furlough Day Is Canceled

 

Joseph Thorndike, Tax Expenditures Should Be Attacked Head On, Not Through the Backdoor (Tax Analysts Blog).

David Brunori, Immigrants are Good for Us (Tax Analysts Blog)

Howard Gleckman, Will Obamacare Delays Encourage Health Exchange Cheating?  (TaxV0x). Just because we can’t verify that you’re not cheating won’t result in massive cheating, according to Mr. Gleckman.  Let’s ask Rashia about that.

Russ Fox, The Most Ridiculous Tax Ever.  He’s talking about the insane “PCORI” fee.

Tax Justice Blog, North Carolina Facing Disastrous New Tax Laws.   The “disatrous” changes include reduction of the individual rate to 5.75% (currently 7.75%) and the corporate rate to 5% (from 6.9%).  If that’s a disaster, here’s hoping for one in Iowa.

Elizabeth Malm, More Details Released on North Carolina Compromise Plan and North Carolina House, Senate, and Governor Announce Tax Agreement (Tax Policy Blog).

 

Jack Townsend,  UBS Client, 78 Years Old, Sentenced to One Year and One Day

There are no athiests in taxholes.  Economist who dodged tax due to ‘religious objection’ gets four years behind bars (New York Post)

 

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Tax Roundup, July 15, 2013: The IRS isn’t a payday-lending company.

Monday, July 15th, 2013 by Joe Kristan

Federal_Bureau_of_Prisons_Seal.svgDon’t think of it as borrowing money from the government.  They don’t look at it that way.  An Iowan has pleaded guilty to criminal charges for failing to remit payroll taxes withheld from employees.  The AP reports that Eric Holub, a Cedar Rapids man, admitted to not remitting withheld taxes from employees of his private security firm.

He may face prison time. It can be tempting to not remit payroll taxes when your vendors want to be paid.  Sometimes employers rationalize it as “borrowing” that will be repaid someday, somehow.  As this case shows, it can be a very expensive “loan.”

Link: Copy of Indictment.

 

Kay Bell,  Monday, July 15, is filing deadline for Boston area taxpayers

 

Penalty declined.  No jail time for Zorich (Chicago Sun Times, via Going Concern).  The former Chicago Bear and Fighting Irishman gets fines, probation for failure to file.

Russ Fox,  Microsafted to ClubFed.  No, that’s not a typo:

Matthew Taylor is heading to ClubFed for a 7 1/2 year of  vacation from
his previous job as an art thief and tax evader.  It’s what he did to
try to hide his crime that makes this case interesting…

What did he do to hide his income?  He used false social security numbers to hide money in bank accounts, he used multiple post office boxes to open other post office boxes, and he sent money to an offshore account.  Those are typical strategies.

It’s a couple of other things he did that grabbed my attention.  He set up phony companies with names similar to other companies (Microsaft, anyone?).  He blamed his mother for all his bank accounts and tax troubles…even though she was in failing health.

Well, at least he won’t have to talk to Mom at awkward family dinners for awhile.

 

Jason Dinesen,  Have an HRA? Make Sure to Pay Your “Patient-Centered Outcomes Trust Fund Fee” .  A tax where the compliance cost will usually exceed the revenue for the government.

TaxTrials, Government Denied Summary Judgment in Conservation Easement Case

 

Brian Mahany, Offshore Account Post: Trust Me, I Am From The IRS

Jack Townsend,  DOJ Requests Tougher Sentencing for Tax Crimes Involving Offshore Accounts.  Shoot to kill the jaywakers.

 

Missouri Tax Guy,  Really, you don’t’ know what an Enrolled Agent (EA) is?  Sadly, the EA designation is widely unknown and undervalued, as Bruce’s post makes clear.

 

TaxGrrrl, Congress Threatens IRS With ‘Right-Sized’ Budget Cuts

The budget, which Chairman Hal Rogers (R-KY) has referred to as “right-sized” (downloads as a pdf), gives the IRS $9 billion for 2014. In a classic case of the pot calling the kettle black, the budget is clearly a tweak at the IRS, which has been the target recently of investigations into disreputable practices, defiant bonuses and questionable spending. Rogers says the spending limits will remain “until there are clear signs that they have fixed their broken bureaucracies, curtailed lavish
spending on employee conferences and awards, and returned to abiding by the will of Congress.”

TaxGrrrl is much more sympathetic to the IRS than I am, but she is right to criticize this typical fire-into-the-crowd approach.

 

Martin Sullivan, Virginia Gas Tax Cut: Drivers Short-Changed at the Pump? (Tax Analysts Blog)

Austin John, Update on the Maryland Rain Tax (Tax Policy Blog)

 

What could go wrong?  An Honor System for Federal Taxes? (Jim Maule).  In truth, the Obamacare individual mandate has some aspects of an honor system, given the inability of the IRS to use its usual collection tools to enforce it.

 

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Tax Roundup, 7/10/13: No tax on foreign losers. And rounding up the tax criminals!

Wednesday, July 10th, 2013 by Joe Kristan

slots.jpgEveryone who is good at math knows that if you play the slots a lot, you will lose.  Sure, you will occasionally get a payoff, but over time the house wins.  That’s why they let you play.

Yet the IRS didn’t let that get in the way of taxing non-resident gamblers.  It says that non-residents have to pay a 30% tax on every winning play, regardliess of the losers.  The Tax Court upheld that position in the case of a Korean gambler, but now the D.C. Circuit Court of Appeals has ruled in the gambler’s favor, allowing him to compute the tax on a “per session” basis, rather than per bet, so that the day’s losses and winnings can be offset.  The court threw the logic of a IRS 2008 technical memo back at the agency:

     The IRS has persuasively interpreted the term “gains” in Section 165(d) to allow U.S. citizens to measure gains on a per-session basis. The IRS stated that “gain or loss may be calculated over a series of separate plays or wagers.” Memorandum AM2008-11, Office of Chief Counsel, Internal Revenue Service 4 (2008) (emphasis added). In the IRS’s words: “We think that the fluctuating wins and losses left in play are not accessions to wealth until the taxpayer redeems her tokens and can definitively calculate” her net gains. Id. Because gain or loss may be calculated over a series of wagers, a “taxpayer who plays the slot machines[] recognizes a wagering gain or loss at the time she redeems her tokens.” Id. Therefore, U.S. citizens do not “treat every play or wager as a taxable event.” Id. The result is that U.S. citizens can measure their gambling winnings and losses on a per-session basis…

     Nothing in the IRS’s Section 165(d) ruling on “gains” turned on the fact that the gamblers were U.S. citizens.

TaxDood has more in Nonresident Gamblers Take a Step Closer to Equality

Cite: Park v. Commissioner, No. 12-1058 (D.C. Ct. App. 2013).

Update: The TaxProf has a roundup.

 

Russ Fox, A Gambler Gambles to Tax Court…and Loses

Trish McIntire, Gambling Rumor.  No, they aren’t disalllowing gambling losses.

 

Lots of tax crime news today.  From New Jersey, we learn that skimming business receipts is not sexy.  A Justice Department press release reports:

A Middlesex County, N.J., man who co-owns  and operates a wholesale merchandise business in New York selling adult  paraphernalia was sentenced today to 19 months in prison for concealing more  than $1.2 million in income in various domestic and foreign bank accounts, New  Jersey U.S. Attorney Paul J. Fishman and Assistant Attorney General Kathryn  Keneally of the Justice Department’s Tax Division announced.

From 2006 through 2009, Gupta diverted $822,916 of the business’  receipts into 17 different personal bank accounts held in the names of various  individuals, including himself and family members. He directed more than  $250,000 of those diverted funds into six different accounts held offshore at a  branch of HSBC in India. From 2007 through 2009, Gupta caused 22 J.S. Marketers  corporate checks to be made payable to
himself and family members in amounts  identical to invoices from the
business’ suppliers. Gupta endorsed those  checks, which totaled $375,138, and deposited them into bank accounts that he  controlled.

17 accounts?  That’s a lot of work that didn’t work out well.

Meanwhile in Oregon, things go badly for a tax protester:  Former Gladstone business owner jailed 97 months for tax evasion, reports the Portland Tribune:

Chester Evans Davis, a 56-year-old Oregon City corporate tax defier, got sentenced to more than eight years in federal prison starting Monday for not filing a corporate tax return five times for his Gladstone business and then trying to obstruct Internal Revenue Service laws.

Davis transferred money from his company to various shell corporations and a warehouse bank, and then used the money to purchase more than $5 million in gold bars and coins. IRS special agents seized over $1 million of that gold, as well as approximately $115,000 in cash, while executing search warrants at Davis’ residence and business.

Again, a lot more effort than filing and paying taxes, and a lot worse result.

Meanwhile in Illinois, the Rockford Register Star reports Tax evading Rockford chiropractor sentenced to prison:

Todd R. Cevene, 42, of Caledonia, was sentenced Tuesday to 10 months in prison by U.S. District Judge Frederick J. Kapala for federal income tax evasion.

Cevene admitted in his plea agreement that during a four-year period between 2004 and 2007, he intentionally evaded payment of his federal income taxes by transferring substantial amounts of Cevene Care Clinic’s income to Cevene Management Group, Todd Cevene Alaska Preservation Trust, and Cevene Enterprises.

There is no magical formula using trusts that makes your taxes go away.

The reeducation of Lauryn Hill.  The singer reported to a federal prison this week to begin serving a three-month sentence on tax charges.

 

Health care taxes: what’s delayed, what isn’t.  My new post at IowaBiz.com, the Des Moines Business Record group blog for entrepreneurs.

Susan Freed, Play or Pay Rules Delayed (Davis Brown Health Care Reform Blog)

 

Joseph Thorndike, House Republicans Would Rather Pander than Fix the IRS (Tax Analsysts Blog):

At the end of the day, they would rather score a few cheap political points than do something to actually fix the IRS.

Yes, the IRS should be adequaately funded.  Yet when the agency proves itself your electoral enemy, you aren’t exactly motivated to fund it.

 

TaxProf, The IRS Scandal, Day 62

William Perez,  Researcher Finds Social Securty Numbers Posted on IRS Public Database

TaxGrrrl, As Second IRS Official Pleads The Fifth, Congress Pushes For ‘Lerner Rule’

 

Jeremy Scott, Summers Pushes for Tax Break on Foreign Profits (Tax Analysts Blog)

Kay Bell, Hurricane season costs tax collectors as well as homeowners

Jason Dinesen, The Oddities of State Taxes — Wisconsin Student Loan Deduction and Nonresident Tax Returns

David Brunori, Taxing Teen Texts and Other Terrible Tax Things (Tax Analysts Blog):

 In addition to fat kids, skinny kids, and kids that climb on rocks, rich kids and poor kids use wireless devices. If everyone is using them, a flat tax is regressive. It is strange that liberal New York and Washington, states purportedly looking out for the little guy, are so enamored with a regressive tax. 

Of course they aren’t looking out for the little guy.  That’s just for the rubes.

Andrew Lundeen, Links: Lap Dance Taxes and Tax Reform Options (Tax Policy Blog).  Lap Dances, marijuana taxes and Warren Buffet, all in one place!

Howard Gleckman, Not All Curbs on Tax Preferences Are Created Equal (TaxVox)

Robert D. Flach,  MY CORRESPONDENCE WITH THE WHITE HOUSE ON TAX REFORM

Brian Maharry, Cell Captive Insurance – Legit Insurance Tool or Abusive Tax Shelter:

The scam promotions typically offer to shelter a large sum of money by calling it an insurance premium. The premium is usually the same dollar amount as the deduction you seek. The promoter offers “insurance” on a highly improbable risk. Hurricane insurance in Nebraska, anyone? Magically, you get a big deduction and in a few years you are promised the ability to get back your money in the form of a “premium refund” or dividend.

It gets windy in Nebraska, especially during football season, but not like that.

 

Oh Noes!  Horror Stories From the CPA Exam: The Prometric Nose Bleed (Going Concern)

 

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Tax Roundup, 7/8/2013: Did IRS scandals stop employer mandate? And full-service postal service.

Monday, July 8th, 2013 by Joe Kristan
The tax law - The Ultimate Swiss Army Knife of public policy.  Flickr Image courtesy redjar under Creative Commons license.

The tax law – The Ultimate Swiss Army Knife of public policy. Flickr Image courtesy redjar under Creative Commons license.

Kay Bell, Did IRS troubles play a role in delay of Obamacare penalty?

During hearings into the various tax agency missteps, it routinely was noted by IRS and Obamacare haters that Sarah Hall Ingram, the employee who now runs the IRS office responsible for implementing ACA, was in charge of the office responsible for tax-exempt organizations between 2009 and 2012.

It was during that period that some groups were put on be on the lookout, or BOLO, lists and their 501(c)(4) applications for tax-exempt status were subject to additional scrutiny.

Such a connection, GOP critics contend, raises doubt as to how fairly and efficiently the IRS can do its health-care policing job.

Gee, how could they ever get that idea?

While it is true that the IRS mistreated right-side groups far worse than left-siders, having the IRS run Obamacare would be a bad idea even if the IRS were run by angels.  The tax law and tax agency are supposed to collect revenue to fund the government.  It does poorly at other things.    Like a Swiss Army knife, if you add too many functions, it stops being good at being a knife.

TaxProf, The IRS Scandal, Day 60.

 

The postman always files twice – once for him, once for you.  From a Justice Department press release:

According to the evidence presented at the trial, Harrison was a U.S. Postal Service mail carrier who was part of a stolen identity refund fraud conspiracy.  Members of the conspiracy used stolen identities to file false tax returns from various locations, including houses and hotels around Birmingham, Ala. and Montgomery.  They then had the fraudulently obtained tax refunds generated by those returns sent to debit cards which were subsequently mailed to addresses on Harrison’s postal route in Montgomery.  In exchange for cash, Harrison stole the debit cards from the mail and provided them to a co-conspirator.  Harrison stole, at a minimum, over 100 debit cards from the mail for his co-conspirators.

It’s a good thing criminals don’t seem to be very smart.  These folks aren’t exactly Dr. Moriarty, but they are getting $5 billion or so from the IRS in stolen refunds annually.  You wonder how much somebody who was a little bit smart would be able to steal.

 

Joseph Henchman,  Which States are Best for Small Businesses?

The Kauffman Foundation and Thumbtack.com teamed up a few weeks ago to produce their second annual Small Business Friendliness Survey, ranking the 50 states on the ease of starting a small business, the ease of hiring, health and labor regulations, taxes, licensing, environmental laws, zoning, and training programs. The study draws upon surveys from 7,000 small business owners.

The finding? Utah is the top-rated state and Austin, TX the top-rated city. At the other end were Rhode Island and Newark, NJ.

Iowa gets a “B-”

 

Jason Dinesen,  Yes, Enrolled Agents Do Need More Respect: ”The EA designation has existed since 1884. Why are we still fighting for respect after 129 years?”

TaxGrrrl, Extreme Weather Serves Up Important Reminders To Taxpayers. “Floods and other disasters are a good reminder that tax and important papers should always be stored in a safe place.”

 

 

Tax reform road trip.  Max & Dave’s Excellent Tax Reform Adventure Kicks Off Today in Minneapolis (TaxProf)

Jack Townsend, Swiss Prepared to Interpret Exchange of Information Treaty Requests More Leniently; Credit Suisse to Deliver Information

Robert D. Flach, THE DFBs!  Struggling to get state refunds in New Jersey.

 

Peter Reilly has finished his personal battle of Gettysburg:  Walking In Armistead’s Footsteps 150 Years Later – Gettysburg Day 3 – Pickett’s Charge and Pickett’s Charge 150 – Aftermath.

Unless they are in the movies?.  No More Tax Credits for Strip Clubs in California (Russ Fox)

 

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Tax Roundup, 7/5/2013: Iowa preparer meets her Waterloo. And a sixty-nine year anniversary.

Friday, July 5th, 2013 by Joe Kristan

20130705-3Waterloo preparer to plead to preparing return with bad deductions.  From the Waterloo-Cedar Falls Courier:

The U.S. Attorney’s Office for the Northern District of Iowa filed a criminal complaint against Victoria A. Jones, age unavailable, in U.S. District Court in Cedar Rapids on Tuesday.

She is charged with one count of aiding in the preparation of a fraudulent return. An arraignment has been scheduled for July 9 in Cedar Rapids.

Authorities allege Jones helped a couple identified only by the initials R.D. and L.D. submit a false tax return to the IRS for 2008. The return claimed the filers had $67,211 in itemized deductions when they had significantly less.

Court document says that she intends to plead guilty, but provides no additional information as to the nature of the false deductions.

 

Iowans Can Now Pay Taxes With Their Phones, Online (The Dwolla Blog).  Only property taxes for now, and only in some counties.  It would be nice if they added income taxes.

 

He shall take Care that the Laws be faithfully executed.  Executive Nullification, Once Again (Arnold Kling)

 

Make everyone poorer, to put the 1% in their place.   From a paper by Karel Mertens (via Tyler Cowen):

A hypothetical tax reform cutting marginal rates only for the top 1% leads to sizeable increases in top 1\% incomes and has a positive effect on real GDP. There are also spillover effects to incomes outside of the top 1%, but top marginal rate cuts lead to greater inequality in pre-tax incomes. 

So cutting top tax rates makes everyone better off.  Yet because it helps the “top 1%” the most, politicians like the President will tell us it’s a bad idea.

 

Ex-Bear Zorich way behind.  The Chicago Tribune reports that former football player Chris Zorich is financially underwater as he faces a July 12 sentencing date on tax charges.

TaxProf, The IRS Scandal, Day 57

Because it would never pass?  Why is the Carbon Tax Missing from the Climate Change Debate? (Tax Justice Blog)

Gene Steuerle, The Baucus-Hatch “Blank Slate” Approach to Tax Reform Could Be Revolutionary:

 

Kay Bell has posted Tax Carnival #118: July 4th Tax Fireworks!

Christopher Bergin, Gratitude on the Fourth of July (Tax Analysts Blog)

TaxGrrrl, Taxes & Independence: Happy Fourth Of July.   Kelly freely quotes the Declaration of Independence, including this:

 He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.

Good thing that couldn’t happen today…

 

Why Exactly Do You  Want An Offshore Account?

Jack Townsend, Information on Filing Delinquent FBARs

 

Economic development for Iowa!  Minnesota: Higher Income and Cigarette Tax Making It the Land of 10,000 Taxes? Philip Hammersley, Tax Policy Blog:

Minnesota Governor Mark Dayton (DFL) recently signed  legislation increasing income and cigarette taxes in the Gopher State. The legislature hopes to raise nearly $2.1 billion in revenue from the tax hikes in order to close the budget deficits and fund new spending projects. The average Minnesota taxpayer currently pays 10.79 percent of his income in state and local taxes. This tax burden makes Minnesota the 7th highest taxed state in the nation.

Iowa’s tax system has more than its share of flaws, but it sure could be worse.

 

Cara Griffith, Taxes and Whistleblower Suits (Tax Analysts Blog).  Should whistleblowers be able to file tax suits against corporations?

Holiday or no, Robert D. Flach has fresh Buzz!  He reminds us that the IRS is closed today.

 

Peter Reilly, Gettysburg Interlude – Understanding Historiography

 

Sixty-nine years ago today, my Dad’s participation in the war ended.  The third stage of the Tour de France went by the place where it happened earlier this week.

The final mission of B-24 42-78127, over the target in Toulon, France.  John Kristan was top turret gunner in one of the planes - likely the one at the bottom of the picture.

The final mission of B-24 42-78127, over the target in Toulon, France. John Kristan was top turret gunner in one of the planes – likely the one at the bottom of the picture.

So my job doesn’t seem so hard today.

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IRS bags a Tiger.

Monday, July 1st, 2013 by Joe Kristan

20130701-1A St. Louis-area tax advisor who more or less successfully fought an IRS attempt to close down his practice has been more effectively taken out of the 1040 business, reports stltoday.com:

A Wildwood tax advisor, Frank L. “Tiger” Zerjav Jr., was sentenced to 18 months in federal prison Thursday for evading his own taxes.

Prosecutors say that Zerjav, 40, of Wildwood, used multiple companies to collect more than $850,000 in income and then deducted  personal expenses from those companies in a bid to dodge taxes  from 2001-2004.

The IRS attempted to shut down the Zerjav tax practice in 2008 on the basis of spectacular allegations that the practice helped clients form S corporations to hold personal possessions and to deduct personal expenses.  Mr. Zerjav and his father fought the IRS and ended up getting a favorable settlement, considering the initial allegations.

Mr. Zerjav pleaded guilty to reporting much less taxable income than he incurred.  For example, he pleaded guilty to reporting taxable income of $43,124 in 2001 when his taxable income was actually $210,268.  The indictment also said he altered Quickbooks records to conceal his taxable income when they were subpoenaed by a grand jury.  He pleaded guilty to counts 1-4 of the indictment.

So while the IRS didn’t get what they wanted when they first tried to shut down the Zerjav practice, this might do the trick.

Update, 7/3/13.  From the U.S. Attorney’s tax release (my emphasis):

According to court documents, during 2000-2007, Frank L.  “Tiger” Zerjav, Jr., and his father, Frank L. Zerjav, Sr., who is a CPA, were  the principals in two entities: Zerjav & Company, PC, a full service accounting firm that primarily prepared business and personal tax returns, and  the Advisory Group USA, LC, which offered tax planning and asset protection  strategies to clients.  Tiger Zerjav  managed the activities of the ccountants working at the firm and advised  existing clients. Through 2003 he also prepared returns and reviewed the returns  prepared by firm ccountants.  Clients of  the Advisory Group included many small business owners and self-employed  individuals.  They were typically advised  to create S-corporations into which the income from their businesses would be  funneled.  Since the net income from an S-Corporation flows through to the owner for inclusion on the owner’s personal  income tax return, there is an obvious incentive to maximize deductions on the  S-corporation return.  Tiger Zerjav used  this strategy in preparing his tax returns for the years 2001 through 2004.

Just because the man in the patent medicine wagon drinks a lot of what he sells, that doesn’t mean it works.

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