Posts Tagged ‘Tax Trials’

Tax Roundup, 10/31/14: Halloween! And: mortgage interest? Put it on the tab.

Friday, October 31st, 2014 by Joe Kristan

20140325-1The deduction for home mortgage interest is hugely popular among those with huge home mortgages. Taxpayers get to deduct all of the interest paid on loans used to buy a home, up to $1 million in principal; they also get to deduct interest paid on the first $100,000 in home equity debt.

But there is a technicality: the interest needs to be “paid.” That was a problem for a California couple in Tax Court yesterday.

The couple bought a home in 1991 for $300,000. They refinanced it for $600,000 in 2007. Then 2008 happened, and they got a loan modification in 2010. Tax Court Judge Lauber explains:

The modifications included a reduction of the interest rate, a change in the payment terms, and an increase in the loan balance. Immediately before the modifications, the outstanding loan balance was $579,275; after the modifications, the new balance was $623,953. The difference (equal to $44,678) resulted from adding the following amounts to the loan balance: past due interest of $30,273, servicing expense of $180, and charges for taxes and insurance of $14,225.

The taxpayers added the $30,273 to the $9,253 the bank put on their 1098 mortgage interest statement for 2010. The IRS noticed the difference and disallowed the $30,273.

20121031-2The Tax Court sided with the IRS:

Petitioners are cash basis taxpayers. It is well settled that “[a] cash-basis taxpayer ‘pays’ interest only when he pays cash or its equivalent to his lender.”

 Through the loan modification agreement, the $30,273 in past-due interest on petitioners’ mortgage loan was added to the principal. No money changed hands; petitioners simply promised to pay the past-due interest, along with the rest of the principal, at a later date. Because petitioners did not pay this interest during 2010 in cash or its equivalent, they cannot claim a deduction for it for 2010. They will be entitled to a deduction if and when they actually discharge this portion of their loan obligation in a future year. 

In short, you can’t just add interest to the loan balance and get a deduction. That has obvious implications for “reverse mortgages.”

As the taxpayers make the payments, they will have some additional factors to consider. Their original purchase price was $300,000 for the house. Unless the additional borrowing was used for renovation or expansion of the home, it is “home equity indebtedness.” Interest on only the first $100,000 of equity debt will be deductible — and only for regular tax, not AMT.

Cite: Copeland, T.C. Memo 2014-226.

 

mst3k-lanternWilliam Perez, The Tax Audit Success Story and Tips from Audit Experts

Jason Dinesen, Same-sex Marriage and State Taxes: 2014

Kay Bell, 2015 income tax rates, income brackets

TaxGrrrl, IRS Announces 2015 Tax Brackets, Standard Deduction Amounts And More

Robert D. Flach has A SCARY THOUGHT for Halloween. “What if the 114th Congress turns out to be made up of most of the same idiots as the 113th Congress!”  It will be.

 

Leslie Book, AICPA Suit Against IRS Voluntary Education and Testing Regime Thrown Out of Court (Procedurally Taxing)

Tax Trials, Tax Court Preserves Taxpayer Protections against Arbitrary and Capricious Appeals Rulings

 

Arnold Kling  on “middle class” tax credits:

Brooks endorses the reform conservative Room-to-Grow idea of showering middle-class families with tax credits. I see that as political posturing. If I could be in charge of tax reform, we would get rid of credits and deductions, and we also would move away from taxing income and instead toward taxing consumption. Note, however, that tax reform is not one of my top three priorities.

Except for the last sentence, I agree with it all.

 

6fpw32atDon Boudreax on the Arnolds Park IRS cash seizure:

I challenge anyone to justify, or even to excuse, such an abuse of power.  (HT a dear and wise and passionate friend.)

Words normally do not escape me, but I can find none that adequately convey the anger and sense of injustice that course through me when I read of seizures such as this one.  Best to let the matter speak for itself, which it surely does to anyone this side of Frank Underwood in decency and civility.  Fortunately, the great Institute for Justice is on the case.

Oh, I’m sure that things like that could never happen if the IRS had a bigger budget.

 

Andrew Lundeen, Tens of Thousands Protest Internet Tax in Hungary (Tax Policy Blog) Would-be dictators come up with wacky ideas.

20141027-2Matt Gardner, Obscure Law Allows Wealthy Professional Sports Team Owners to Reap Tax Windfalls (Tax Justice Blog) . He doesn’t care for intangibles amortization.

 

TaxProf, The IRS Scandal, Day 540

 

News from the Profession. Grant Thornton to Have Rat Problem for Foreseeable Future (Adrienne Gonzalez, Going Concern)

Tony Nitti, Want To Do Your Part To Help Fight Ebola? Skip Your Next Vacation. OK, I’m skipping my next vacation to Liberia.

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Tax Roundup, 10/20/14: Extension season is over. Now what? And: do your part for Boeing!

Monday, October 20th, 2014 by Joe Kristan

We are now in the sweet spot of the tax year. We are done with extended 1040s, and it’s too early to get most people to do year-end tax planning. That’s why this is the continuing education season for most of us.

The Iowa State University Center for Agricultural Law and Taxation Farm and Urban Tax Schools begin next week. I will be speaking on the Day 1 program for all schools, starting October 28 in Waterloo, Iowa. Tour stops also include Maquoketa, Sheldon, Red Oak, Ottumwa, Mason City, Denison and Ames. Who said public accounting lacks glamour?

Now to get those slides prepared…

 

Government is just a word for things we do together. Like subsidizing big corporations. Using information from Good Jobs First, Veronique de Rugy of the Mercatus Institute provides a chart of the biggest known recipients of state subsidies:

20141020-1

Meanwhile, everyone else pays a little higher tax rate to grease Boeing’s landing gear. I believe that the damage caused to the taxpayers who don’t get these subsidies makes losers out of the states that win tax incentive bidding wars.

 

20140805-3Kay Bell, 2014 tax planning starts with your tax bracket

Annette Nellen, Premium Tax Credit Problems, “This is a big deal because the PTC serves to help make health insurance affordable to individuals with income between 100% and 400% of the federal poverty line.”

TaxGrrrl, Apple Seeds Perk Wars, Adds Egg Freezing As Employee Benefit.  Is that a tax-free benefit? It makes me wonder about their work-life balance.

Peter Reilly, UnFair: Exposing The IRS – Does Not Make Strong Case Or Decent Documentary. Peter watched the movie so you don’t have to.

Tax Trials, Tax Court Preserves Taxpayer Protections against Arbitrary and Capricious Appeals Rulings

Russ Fox, Copying Steven Martinez’s Idea Is Not a Good Choice. If you think you need to murder nine witnesses to stay out of jail, you probably won’t stay out of jail.

 

 

The Tax Prof reports that Linda Beale will resume tax blogging after going off the air as a result of the death of her husband. My condolences to Linda and her family.

Jim Maule, Putting the Brakes on Tax Breaks. “Never do indirectly through taxes what can and should be done directly.”

 

Andrew Lundeen, Most Common Jobs by Income Bracket (Tax Policy Blog). The professions do well.

Richard Auxier, Ahead of the Midterms, State Economic Trends Present Mixed Signals (TaxVox). “A September Pew Research poll found that while Americans’ assessment of job opportunities had improved, 56 percent reported their family’s income was falling behind the cost of living.”

 

TaxProf, The IRS Scandal, Day 529

20141020-2

Quotable. Tax Analysts David Brunori  on a proposed film credit for the music industry in New York ($link):

Like their film equivalents, tax breaks for musicians are bad tax policy. Even if music producers were swayed by taxes, those breaks would be bad policy. Why musicians? Why not cab drivers? Orthodontists? Flamenco dancers? New York lawmakers, many of whom wanted to be Billy Joel growing up, will probably say yes to this terrible idea.

While I have a rooting interest in the music industry, the tax credit idea is awful.

 

News from the Profession. Let’s Watch This Audit Senior Quit His Job in the Most Fabulous Way (Adrienne Gonzalez, Going Concern)

 

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Tax Roundup, 9/5/14: Obamacare tax credits get a reprieve. And: what’s $14 billion waste for a good cause?

Friday, September 5th, 2014 by Joe Kristan

The U.S. Court of Appeals for the D.C. Circuit will re-hear Halbig.  The full court will re-decide the decision reached by a three-member court panel that limited tax credits under Obamacare to policies purchased through state-established exchanges.  As 36 states have not established exchanges, the decision would have undermined both the employer and employee mandates, which are largely dependent on the tax credits.  Jonathan Adler has more.  Michael Cannon explains the politics behind the decision to re-hear the case.

 

EITC error chartLeslie Book, IRS Issues New Report on EITC Overclaims (Title A).  Leslie covers the recent IRS report on how much of the cost of this welfare program run through tax returns is misspent:

“As a result of the EITC program growth the total overclaims in the study are higher in the 2006-08 Report than in the past 1999 study, with annual overclaim estimates for 2006-08 at $14 billion (lower estimate) or $19.3 billion (higher estimate), compared to 1999 figures of $12.3 billion (lower estimate) and $14 billion (higher estimate).”

The report shows that the errors arise largely from misreporting of income and claiming ineligible dependents.  While some of the errors are attributable to complexity, the skewing of the errors to extra refunds points to widespread cheating.  Complexity errors would tend to be more equally split between overpayments and underpayments, but the vast majority of errors resulted in EITC overpayments.

All of this makes Arnold Kling’s proposal to roll all means-tested welfare programs into a single voucher grant with a uniform phase-out rate look wise.

 

haroldMore on the Iowa Film Credit Settlement with a Rhode Island filmmaker from Maria Koklanaris at Tax Analysts ($link):

The state admits no liability in making the settlement, according to the agreement. An accompanying letter from Adam Humes, a state assistant attorney general, to Joseph Barry of the state Department of Management, says that “the agreement will resolve all claims related to these film projects, and all claims in . . . the civil case in exchange for a cash settlement. After the settlement becomes final, the civil case . . . will be dismissed with prejudice.”

Joe Kristan of Roth & Co. PC of Des Moines said several civil suits arose after the state “slammed the brakes on everything” to do with the film tax credit scandal, which resulted in seven criminal convictions amid revelations that the state had issued $26 million in improper credits.

You gotta like her sources.

 

Sebastian Johnson, Big Oil Wins In Alaska, Hollywood Wins in California.  Because California has plenty of cash to shower on filmmakers…

Russ Fox, $1.25 Billion Attracts Tesla to Nevada

 

Kyle Pomerleau, IRS Aims to Tax Silicon Valley Workers’ Fringe Benefits (Tax Policy Bl0g).

“The IRS and U.S. Treasury Department last week included taxation of “employer-provided meals” in their annual list of top tax priorities for the fiscal year ending next June. The agencies said they intend to issue new ‘guidance’ on the matter, but gave no specifics about timing or what the guidance would say.”

The IRS believes that the regular free meals provided to employees are a fringe benefit and should be taxed like compensation.

You can make a good theoretical argument that a lavish Silicon Valley cafeteria results in taxable income for the employees. It’s much harder to make a good practical arguemnt for taxing that benefit.  There are serious measurement problems, and the amount of revenue at stake hardly seems worth it.

 

buzz20140905It’s Friday!  That means it’s Buzz day for Robert D. Flach, who buzzes from taxing frequent flyer miles to taxing marijuana.  However you get high, there’s a tax for that.

William Perez, How to Deduct Car and Truck Expenses on Your Taxes.  “To prove you are eligible to deduct your car and truck expenses, you should keep a mileage log.”

Paul Neiffer, Partner Must Have Basis to Deduct Loss. “The bottom line is if you show a loss from a partnership, make sure you have enough “basis” to deduct the loss.”

Kay Bell, New NFL players ready for football, IRS ready for their taxes

Peter Reilly, IRS Shows Serious Meatspace Prejudice.  “You would think with all the pressure that it puts on people to file and pay electronically that the IRS would have a forward looking view and a preference for cyberspace.  It does not seem to be that way  in the tax exempt division, where meatspace seems to be much preferred.”

 

Jack Townsend discusses an Article on Swiss Banks in U.S. DOJ Program.  He quotes from the article:

Caught in the crossfire of these strategies, however, are thousands of bank clients who are either innocent of tax evasion offences or were unaware of their reporting responsibilities.

These include US citizens living and working in Switzerland who cannot open bank accounts or take out mortgage loans. In some cases they have been expelled by their banks as involving too much unwanted paperwork and risk.

Well done, Congress.  Your FATCA makes everyday personal finance a miserable challenge for Americans abroad.

Tax Trials, IRS Updates Internal Revenue Manual for Streamlined Offshore Compliance

 

horse 20140905Annette Nellen, Shakespeare, building your vocabulary … and taxes.  She summons up a “parade of horribles” — well, a judge she quotes does.

TaxProf, The IRS Scandal, Day 484

 

Should I show this to my high school junior?  What Every High School Junior Should Know About Going to College (Bryan Caplan).  “College is a good deal for good students, a mediocre deal for mediocre students, and a poor deal for poor students.”

News from the Profession: EY Is No Longer Blocking Sports Websites Just in Time for Football Season (Adrienne Gonzalez, Going Concern)

 

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Tax Roundup, 8/18/14: Tax Credits for housing. And for Elvis!

Monday, August 18th, 2014 by Joe Kristan

The Des Moines Register is running a series on Jack Hatch, the Democratic nominee for Iowa Governor, focusing on subsidized housing projects he developed.  The stories include Jack Hatch’s record shows no clear conflicts of interest and Review shows Hatch followed public financing rules.

The Register finds no evidence of illegality in Sen. Hatch’s tax credit-driven deals.  That’s unsurprising, as the tax credits are shared with investors, who want clean tax projects and impeccable tax breaks.  As usual with tax incentives, though, the scandal is what is perfectly legal.

The series describes the financing of some projects.  For example:

20140816-1

 

A $6.5 million development with over $8 million in government aid.  A sweet deal, if you are one of the lucky participants of an oversubscribed subsidy program.

While such projects are touted as achieving “affordable housing,” the real beneficiaries are arguably well-connected developers and tax shelter investors.  It’s all legal, and all paid for by the rest of us.

If the real goal is to help the poor, there are better ways than a Rube Goldberg tax credit system running the aid through tax shelter developers and investors.  Arnold Kling’s idea to provide the poor with a universal flexible benefit “to replace all forms of means-tested assistance, including food stamps, housing subsidies, Medicaid, and the EITC, with a single cash benefit,”  is a more promising approach.  It is what a program designed to help the poor, rather than the connected, would look like.

 

Elvis20140818-3Kay Bell, Elvis estate seeks tax breaks for Graceland expansion.  Or what?  Graceland is going to leave Tennessee?  Elvis will leave the building?  But, but, jobs!  Or something.

Robert D. Flach, KEEP COPIES OF YOUR W-2s FOREVER!  Robert explains how he was able to use old W-2s to help a client show that his retirement contributions were “after tax” for New Jersey purposes, preventing a second tax on withdrawal.

Tony Nitti, New Opportunities Exist For S Corporation Shareholders To Deduct Losses

William Perez, Got a Call From the IRS? It’s Probably Not the IRS.  A client of our office got such a scam call last week.  We told them to hang up if they call back.

Jack Townsend, Tidbits on the New Streamlined Procedures

Annette Nellen, Better identity theft efforts – S. 2736

 

20140818-1Jason Dinesen, Why an LPA?  Jason answers the question “Why did I pursue an Iowa “Licensed Public Accountant” designation? LPAs are an obscure lot, in that we only really exist in 3 states (Iowa, Delaware and Minnesota).”

Peter Reilly, IRS Stampedes A Cattle Shelter.  Peter explains why losing a hobby loss case is extra bad.  With a bonus quote from me (Thanks, Peter!).

Tax Trials, Record Your Easement: Tax Court Adjusts Timing & Valuation of New York Facade Easement

 

TaxGrrrl, From AR-15s To Rubber Bullets: How Did Police End Up With Military Gear On American Streets?  Your tax dollars at work.  Amazingly, no tax credits appear to be involved.

TaxProf, The IRS Scandal, Day 466.  It appears the judge who told the IRS to explain what happened to the Lois Lerner emails isn’t yet satisfied with the IRS response.  More from Russ Fox: Judge Sullivan Not Impressed by the “Dog Ate my Homework” Excuse.

20140818-2Ajay Gupta, Demagoguing the ‘I’ Words. (Tax Analysts Blog) “If an inversion exploits a loophole, then so does every other corporate reorganization that painstakingly adheres to the requirements of the code and regs.”

Steven Rosenthal, Can Obama slow corporate inversions? Yes he can.  Silly rabbit.  The idea isn’t to slow corporate diversions; it’s to demonize them for political fun and profit.  And his idea of reviving the moribund Sec. 385 debt-equity regulations for this purpose shows how much the inversion panic has parted from reality.

 

News from the Profession.  Here’s Further Proof That Accounting Firms Need a Charge Code for “Wasting Time on Internet” (Caleb Newquist, Going Concern)

 

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Tax Roundup, 7/3/2014: Interested generosity edition. And: cheap smokes!

Thursday, July 3rd, 2014 by Joe Kristan

20140703-2If you wouldn’t have gotten the cash if you had kept your clothes on, it may not be a gift.  A “professional adult entertainer” was convicted on tax charges in Sioux Falls last week.  She apparently treated cash thrust upon her in performance as nontaxable gifts, according to the Associated Press writeup. Gifts are good to receive for many reasons, not least because they are not taxable income.  Of course the tax law is pretty strict about what it takes to be a gift, or we would all be working for nontaxable holiday bonuses.   The jury instructions in the case explain what it takes for something to be a gift:

The practical test of whether income is a gift is whether it was received gratuitously and in exchange for nothing.  Where the person transferring the money did not act from any sense of generosity, but rather to secure goods, services, or some other such benefit for himself or for another, there is no gift.

I wonder if it ever struck the professional adult entertainer that while men eagerly stuffed dollars into her garter on stage, they seldom stuffed cash into the elastic of her sweats at the local Hy-Vee.  It must have occurred to her that there was some connection with what she was wearing, or not, on stage and the generosity of her admirers.  If it didn’t before, it probably has now.  Sentencing is set for September.

Liz Emmanuel, Richard Borean, State Cigarette Tax Rates in 2014. (Tax Policy Blog):

20140703-1   Life is good for Missouri cigarette dealers on the Iowa border.   20120531-2

Robert D. Flach brings your Friday Buzz on Thursday in honor of Independence Day.

Jana Luttenegger, New Simplified Application Form for Small Nonprofits and UPDATE: Form 1023 EZ Released for Small Nonprofits (Davis Brown Tax Law Blog)

Tax Trials, IRS Offers New Streamlined Procedures & Reduced Penalties for Foreign Accounts

Trish McIntire, Why E-file a Tax Return…

TaxGrrrl, Money Literally Flying At World Cup: Is It A Clever Attempt At Tax Avoidance?  Strange soccer doings in Ghana.

Jim Maule gets his Tax Myth series underway with The IRS Enacted the Internal Revenue Code and If It’s Not Cash, It’s Not Income.  It always bugs me when congresscritters talk about the “IRS Code.”  It strikes me as sneaky blame-shifting by the perpetrators.

Jason Dinesen, From the Archives: Patient-Centered Outcomes Trust Fund Fee – An Exercise in Bureaucratic Futility

Kay Bell, Fitness enthusiasts exercised over D.C.’s new yoga sales tax

 

 

Cara Griffith, Censorship in New Hampshire? (Tax Analysts Blog):

The DRA can be opposed to the website all it wants. That does not give it the right to monitor it or demand modifications to its content. Yet the DRA is going one step further. It is attempting not only to prohibit the use and publication of information about its general policies, but to impose criminal penalties on the publication of truthful information about a matter of public concern.

It sounds like The New Hampshire Department of Revenue Administration badly needs some exemplary firings.

 

20130912-1Lyman Stone, Happy July 2! 14 States Exempt Flags from Their Sales Taxes (Tax Policy Blog).

Roberton Williams, President Obama’s FY 2015 Budget (TaxVox). “Most of the president’s tax proposals have appeared in previous budgets, but he added four new ones this year. TPC delves into those additions in a separate analysis that accompanies the distributional estimates.” None of them will be enacted during the remainder of the Obama presidency.

 

That would be “zero.”  41 Million July 4th Travelers Would Have a Nicer Trip if Corporations Paid Their Fair Share (Steve Wamhoff, Tax Justice Blog).  Why zero? Scott Sumner explains that “There should be no corporate income taxes, which represent triple taxation of wage income.”

TaxProf, The IRS Scandal, Day 420

Has the NHL lost its focus?  Hockey aiming to tighten tax loophole

Have a great Independence Day!

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Tax Roundup, 3/27/14: NASCAR subsidy heads to Governor. And lots more!

Thursday, March 27th, 2014 by Joe Kristan

20120906-1Don’t worry, our subsidies are carefully crafted to only help Iowans, and only for a limited time.  Until it’s slightly inconvenient.

When they built the big new racetrack in Newton, they had a unique deal: the track got to keep the sales tax it collected.  The deal was crafted to require the track be partly owned by Iowans, and that it would expire at the end of 2015.

Then NASCAR bought the track.  NASCAR is controlled by a wealthy North Carolina family , with nary an Iowan.  No problem!  The Iowa House sent a bill to the Governor yesterday (SF 2341) repealing the Iowa ownership rule and extending the subsidy through 2025.

The stories in Radio Iowa and the Des Moines Register only quoted the giveaway’s supporters.  For example:

Representative Tom Sands, a Republican from Wapello, said it’s a “performance based” tax break because NASCAR won’t get the rebate unless there are on-site sales.

“One of the questions might be: ‘What kind of return do we, taxpayers, get in the state of Iowa?’ And I drive on Interstate 80 twice every week like many of you do coming to Des Moines and have seen the construction that has happened around that Speedway just since it’s been there,” Sands said, “and we’ve got probably lots more of that we can expect into the future.”

The answer to that is: what makes this private business more worthy to keep its sales taxes than anyone else?  It’s a special deal that every other Iowa business competing for leisure dollars doesn’t get.  It’s the government allocating capital, and if anybody thinks the state is good at that, I’d like my Mercedes, please.

While this corporate welfare passed, at least some legislators are starting to wonder about this sort of thing.  14 representatives joined 9 state senators in opposing the bill.  When the Iowa Film Tax Credit passed, there were only three lonely opponents.  The 14 representatives who stood up for the rest of us: Baudler (R, Adair), Fisher (R, Tama), Heddens (D, Story), Highfill (R, Polk), Hunter (D, Polk), Jorgensen (R, Woodbury), Klein (R, Washington), Olson (D, Polk), Pettengill (R, Benton), Rayhons (R, Hancock), Salmon (R, Black Hawk), Schultz (R, Crawford), Shaw (R, Pocahontas) and Wessel-Kroeschell (D, Story).  Maybe we have the makings of a bi-partisan anti-giveaway coalition.

 

20120702-2Jason Dinesen, Iowa Tax Treatment of an Installment Sale of Farmland By a Non-Resident.  “The capital gain is recognized in the year of the sale and is taxable in Iowa. But what about the yearly interest income the taxpayer receives on the contract going forward?”

TaxGrrrl, Taxes From A To Z (2014): N Is For Name Change   

Paul Neiffer, Painful Form 8879 Process is on its Way.  The IRS, which has forced us to go to e-filing, now plans to make it a time-consuming nightmare for practitioners and clients because of the IRS failure to prevent identity theft.

Tax Trials, U.S. Supreme Court Reverses Sixth Circuit on FICA Withholding for Severance Payments

Margaret Van Houten, Digital Assets Development: IRS Characterizes Bitcoin as Property, Not Currency

William Perez, Tax Reform Act of 2014, Part 2, Income

 

Illinois sealLiz MalmHow much business income would be impacted by Illinois House Speaker Madigan’s Millionaire Tax?

These data indicate that:

  • 54 percent of total partnership and S corporation taxable income in Illinois would be impacted by Speaker’s Madigan’s millionaire surcharge. That’s almost $10 billion of business income.

  • 6 percent of sole proprietorships AGI would be impacted. Important to note here is that not all sole proprietorships earn small amounts of income. Over three thousand would be hit by the millionaire tax, impacting $674 million of income.

  • Taken together, this indicates that 36 percent of pass-through business income is earned at firms with AGI with $1 million or more.

I don’t think this will end well for Illinois.  When you soak “the rich,” you soak employers.  When states do this, it’s easy to escape.

 

Christopher Bergin, Good Grief! Tax Analysts v. Internal Revenue Service (Tax Analysts Blogs)

I have been involved in two Tax Analysts FOIA lawsuits against the IRS. Neither one of them should have gone to federal judges. But the IRS’s secrecy, paranoia, and belief that it has the absolute right to hide information drives it in this area. This lawsuit was a waste of time and money – against an agency that argues that it doesn’t have enough of either — over documents that should have been public from the beginning.

I’m left to quote Charlie Brown: Good grief! What an agency.

Commissioner Koskinen’s pokey response to Congressional document requests needs to be considered in this context.  The IRS has not earned the benefit of the doubt.

Kay Bell, IRS chief Koskinen spars with House Oversight panel

 

Greg Mankiw, Not Class Warfare, Optimal Taxation:

Today’s column by Paul Krugman is classic Paul: It takes a policy favored by the right, attributes the most vile motives to those who advance the policy, and ignores all the reasonable arguments in favor of it.

In this case, the issue is the reduction in capital taxes during the George W. Bush administration. Paul says that the goal here was “defending the oligarchy’s interests.”

Note that when Barack Obama ran for President in 2008, he campaigned on only a small increase in the tax rate on dividends and capital gains. He did not suggest raising the rate on this income to the rate on ordinary income. Is this because Barack Obama also favors the oligarchy, or is it because his advisers also understood the case against high capital taxation?

Oligarchists everywhere.

 

20140327-1Leigh Osofsky, When Can Concentrating Enforcement Resources Increase Compliance? (Procedurally Taxing)

Cara Griffith, Taxing Streaming Video (Tax Analysts Blog)

TaxProf, The IRS Scandal, Day 322

Renu Zaretsky, Friendly or Penalty? Taxes on Married Couples, Businesses, and the Uninsured (TaxV0x).  Rounding up the tax headlines.

Jack Townsend, Scope and Limitations of this Blog: It Is a Tax Crimes Blog, not a Tax Crimes Policy Blog.  “I conceive my blog as a forum to discuss the law as it is, including how it develops.  It is not a tax policy blog addressing issues of what the law ought to be.”

 

Russ Fox, Bozo Tax Tip #9: 300 Million Witnesses Can’t be Right.  Richard Hatch is not widely considered a tax role model.

News from the Profession.  Frustrated EY Employee Vandalizes Office Breakroom in Protest Over March Madness Blocking (Going Concern)

 

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Tax Roundup, 2/12/14: Lawless and Unregulated edition. And: Lincoln!

Wednesday, February 12th, 2014 by Joe Kristan

20130121-2As we reported yesterday, the IRS preparer-regulation power grab failed in the D.C. Court of Appeals.  The three-judge panel unanimously ruled that “The IRS may not unilaterally expand its authority through such an expansive, atextual, and ahistorical reading” of the law.

One grumpy IRS person told us that we would regret it, that Congress will pass a worse IRS-run preparer regulation regime.  While it’s possible, I don’t think Congress is in any mood to give the IRS more power right now (see TaxProf, The IRS Scandal, Day 279).

It’s a victory for taxpayers, for preparers, and for the rule of law.  One hope it is a good omen for future court decisions on the on-the-fly rewrites of the Obamacare effective dates.

My endzone dance is here.  The Tax Prof has a roundup of coverage, as well as a guest op-ed: Johnson: The D.C. Circuit Rejects the IRS’s Regulation of Tax Return Preparerswhich says “At bottom, Loving stands for the proposition that exigency does not excuse illegality.” 

Other tax bloggers weigh in:

Russ Fox, DC Court of Appeals Rules Against IRS: Loving Decision Upheld.  “The real problem is the huge complexity of the Tax Code, and the biggest villain here is Congress. Rather than regulating tax professionals, we need to regulate (gut) the Tax Code itself.”

Leslie Book, Initial Reactions to the Government’s Loss in Loving (Procedurally Taxing):  “The government may seek to get Supreme Court review of the matter, or may work with Congress to get specific legislative authority. I offer no views on the odds of the government seeking cert, but its sound beating in two opinions leaves the possibility of obtaining cert and a victory in the Supreme Court seemingly small.”

Joseph Henchman, Big Win for Taxpayers: IRS Loses Effort to Expand Power Over Tax Preparers (Tax Policy Blog).  “In May 2013, we filed a brief opposing an IRS appeal of a court decision striking down their regulation of small tax preparers.”  That’s the brief I joined, along with fellow tax bloggers Russ Fox and Jason Dinesen.

Trish McIntire, The IRS Lost!  “I don’t know if there can be any more appeals (not a lawyer) but I bet there will be a tax preparer bill in Congress soon.”

 

20130419-1Paul Neiffer, When Farmers Barter.  While bartering is taxable, Paul muses: “Some of these barter transactions are properly reported, however, my educated guess is that much higher percentage is not.”

William Perez, How to Handle Owing the IRS

Tony Nitti, Tax Geek Tuesday: Allocation of Partnership Liabilities “Admit it. Nobody really understands what’s going on in this remote corner of the K-1; typically, most tax preparers just apply the tried-and-true “same as last year” approach to allocating liabilities, and trust that it won’t matter in the end.”  Oh, it does, it does.

Jana Luttenegger, “Extensive Wait Times” Ahead with the IRS (Davis Brown Tax Law Blog).  And it’s not like they were brief before.

Kay Bell, The pros and cons of tax refunds.  While logically you don’t want to let the taxman sit on your money, clients always seem happiest with a fat refund.  That leads many tax advisors to sandbag a bit on payments.

TaxGrrrl, Yes, Olympic Wins Are Taxable (And Should Stay That Way) 

 

Peter Reilly, Pilot To Black Panther To Pastor Calls For Financial Transparency In Churches 

 

Jack Townsend, Corporate Corruption Case Charged With Swiss Bank Accounts to Hide the Loot 

Tax Trials, The Tax Education of Lauryn Hill

Annette Nellen links to the Video of IRS Commissioner Koskinan on the filing season.

 

The Iowa Department of Revenue has a Facebook page!  It’s a good idea, and they actually answer questions, like this:

 20140212-1

It’s great that they are answering disgruntled taxpayers for everyone to see.  Best thing is that it’s available to anybody, not just Facebookers.  You don’t have to bring yourself to “like” the Department of Revenue to read it.

 

David Brunori, Tax Breaks for Lawyers — No Joke (Tax Analysts Blog):

I read recently in the Kansas City Business Journal that Missouri gave a big law firm $2.8 million in tax incentives to move to Kansas City. I thought there must be some kind of mistake. Certainly, no politician would agree to give citizens’ hard-earned money to lawyers. And certainly, they would not give citizen money to big-firm, wealthy lawyers. But once again, reality trumps good tax policy. The Missouri Department of Economic Development gave the nearly $3 million to attract the international law firm Sedgwick LLP to downtown Kansas City. 

Must be a rough neighborhood if that’s considered an improvement.  Or, more likely, Missouri has completely lost its mind.

 

Tax Justice Blog, The States Taking on Real Tax Reform in 2014.  One blog’s “real tax reform” is another blog’s march to madness.

News from the Profession: Big 4 Dude Says Dudes at His Firm Rewarded For Treating Non-Dudes Like Dudes (Going Concern)

 

LincolnToday is Abraham Lincoln’s birthday.  He was born 205 years ago today in Kentucky, before anybody thought of an income tax.  His presidency saw the first U.S. federal income tax, passed to finance the Civil War.  The Revenue Act of 1861, Section 49, imposed a flat 3% levy “upon the annual income of every person residing in the United States, whether such income is derived from any kind of property, or from any profession, trade, employment, or vocation carried on in the United States or elsewhere, or from any other source whatever” over $800.  It was replaced by a progressive levy in 1862, with a 3% rote on income over $600, with a 5% rate kicking in at $10,000.

The tax expired under its own terms in 1866, after Lincoln’s death.  Lincoln never came back, but the income tax returned to stay in March 1913.

 

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

Friday, January 31st, 2014 by Joe Kristan


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

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

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

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

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

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

 

Flickr image courtesy Shock264 under Creative Commons license

Flickr image courtesy Shock264 under Creative Commons license

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

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

 

Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

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

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

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

 

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

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

Just inflation and government policy risk.

 

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

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

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

Trish McIntire, IRS Notice Prevention

 

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

 

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

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

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

 

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

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

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

 

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

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

 

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Tax Roundup, 1/27/14: Job destruction incentives. And: did you ride your bike today?

Monday, January 27th, 2014 by Joe Kristan

 

Flickr image courtesy Retrofresh! under Creative Commons license.

Flickr image courtesy Retrofresh! under Creative Commons license.

You mean state tax credits aren’t magic beans for economic development?  A frequent commenter on the Econlog blog, Daniel Kuehn, shares some early work on a paper he is preparing on “job creation tax credits” (my emphasis):

 The paper is on the employment and earnings effects of job creation tax credits (and actually investment credits… I’ve recently found out they were phased in using the same selection rule so I can’t distinguish the two, which is fine I guess).

My prior was that they would create jobs and raise wages. I have a good identification strategy – an RDD model. But one thing lacking in the existing literature on it is a way of dealing with displacement effects (in other words, person A gets the job from the tax credit by displacing person B who was not eligible for the credit). I can deal with that (at least within-county displacement). I expected that would reduce the effect somewhat of course, but I was sure even after accounting for displacement the credits would still generate jobs.

So far, they seem to reduce employment. Displacement appears to be a big problem.

There is one other explanation I’m investigating now. You have to create full time jobs to get the credit, so it is possible that I’m seeing a negative employment effect because part time jobs are being replaced with full time jobs. I’m investigating that now with individual level data. So in the end, it may create full time jobs and destroy more part time jobs, in which case it would be interesting to look at the impact on total hours.

I’m not sure how it will all shake out in the end, but I am definitely less confident in policy than I was before I started this.

Mr. Kuehn should be respected for following his data in spite of his prior assumptions, but that’s the result I would have expected.  The money going to the subsidized jobs has to come from somewhere, and much of it comes from unsubsidized businesses.  The politicians like to point to the jobs they “create” with “Economic development” incentives, but they ignore the loss of jobs in competing businesses and from the increased taxes on the unsubsidized.

It’s the old broken window thing.

Related: IF TRUTH IN ADVERTISING APPLIED TO ECONOMIC DEVELOPMENT AGENCIES

 

Scott Drenkard, Indiana House Unanimously Approves Incentive Study Commission.  Iowa did this a few years ago, and the study panel was unable to identify any clear economic benefit to the giveaways.  And they just went on enacting more giveaways.

 

William Perez points out some Resources for Getting Organized for Tax Time

Kay Bell, Tax filing checklist 2014

Paul Neiffer reminds us that You Must Start IRAs Draws at Age 70 1/2!.  Except for Roth IRAs, of course.

Jana Luttenegger, Taxing Bike Share Programs.  She discusses the expiration of a tax break for bike commuters, but notes:  ” With our recent below-zero weather, the bikes likely aren’t being used much currently… “

Enjoying a short Des Moines winter commute.

Enjoying a short Des Moines winter commute.

Russ Fox answers the question, It’s Only $1,300; Do You Really Have To Send Me the 1099?

 

Annette Nellen, Minnesota Storage Tax Problems.  She discusses an expansion of Minnesota sales taxes:  “Any base broadening should only cover consumption of individuals (non-businesses).”

Peter Reilly, Obama Administration Weak On Church State Separation? Clergy Housing Allowance Appeal.  The Department of Justice has appealed the Wisconsin District Court Ruling disallowing tax-free cash “housing allowances” for pastors.  The ruling is stayed pending the appeal.  I suspect this is just a maneuver to get through this tax season with minimal disruption to existing plans.  I think it is likely that the District Court ruling will be upheld, and churches should plan accordingly.

 

tax fairyJack Townsend, Yet Another B***S*** Tax Shelter Goes Down Flaming.    There is no tax fairy.

Stephen Olsen, Summary Opinions for 1/24/2014 (100th Post!!!), a roundup of tax procedure news.

 

TaxProf, The IRS Scandal, Day 263

That’s a funny way to aid the nurses.  Second Nurses Aide Sentenced for Conspiracy to Defraud the Government (U.S. Attorney press release)

Tax Trials, Willie Nelson, The IRS’s Most Talented Musician.  Talk about not building expectations.

News from the Profession: The SEC Bans Big 4 Member Firms in China For Failing to Show Their Work (Going Concern)

 

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Tax Roundup, 1/21/14: Weaponizing the IRS. And: whither Section 179?

Tuesday, January 21st, 2014 by Joe Kristan
Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

The new, “weaponized” IRS is a focus of Glenn Reynolds, the Instapundit, in a USA Today Column:

Since then, of course, the new “weaponized IRS” has, in fact, come to be seen as illegitimate by many more Americans. I suspect that, over time, this loss of moral legitimacy will cause many to base their tax strategies on what they think they can get away with, not on what they’re entitled to. And when they hear of someone being audited, many Americans will ask not “what did he do wrong?” but “who in government did he offend?”

This is particularly true since the Obama administration is currently changing IRS rules to muzzle Tea Partiers.

While I don’t think it’s that bad yet, it’s headed that way if things don’t change.  And, as Glenn points out, it’s not changing:

Meanwhile, the person chosen to “investigate” the IRS’s targeting of Tea Party groups in 2010-2012 is Barbara Bosserman, a “long-time Obama campaign donor.” So the IRS’s credibility is in no danger of being rebuilt any time soon.

I think this is a terrible and shortsighted mistake by the Administration.  So much of its agenda, especially Obamacare, depends on effective IRS administration, but as the recent budget agreement proved, the GOP isn’t going to fund the IRS when it thinks that’s the same as funding the opposition.

The USA Today piece makes broader points about the effect of the loss of faith in civil servants as apolitical technocrats; read the whole thing.

Via the TaxProf.

Andrew Lundeen at Tax Policy Blog has two new posts on tax reform.  In Tax Reform Should Simplify the Code and Grow the Economy, he says:

We need to eliminate the biases in the code against savings and investment, so individuals have the incentive to add back to the economy, and businesses have the capital to buy new machines, structures, and equipment – all the things that give workers the ability to be more productive and earn higher wages. And we need a tax code that is simple and understandable, so taxpayers know exactly what they pay and why. 

Max Baucus

Max Baucus

We’ve been going the wrong way now for 27 years.  In Responses to Senator Baucus’s Staff Discussion Drafts, he curbs his enthusiasm for the tax reform options offered by outgoing Senate Finance Committee Chairman Baucus:

Generally speaking, we found that the tax reform proposals in these drafts go in the wrong direction. Our modeling shows that they damage economic growth, hurt investment, and, in many instances, violate the principles of sound tax policy: simplicity, transparency, neutrality, and stability.

The post links to a point-by-point examination of the Baucus proposals.

 

 

TaxProf, Martin Luther King, Jr. and the IRS:

This past year, much ado was made about the so-called “IRS-Gate” and concerns that the Obama administration may have used the agency to target Tea Party and other right wing groups. … [W]hat often is not stated during the Martin Luther King Holiday weekend is that King, early in his leadership of the Southern Christian Leadership Conference (SCLC), was routinely subjected to IRS audits of his individual accounts, SCLC accounts as well as accounts of his lawyers, first starting during the administration of President Dwight Eisenhower and continuing through the Kennedy administration.

If you audit me, I shall become more powerful than you can possibly imagine…

Kay Bell, IRS abuse of power, now and in MLK’s day. “Overall, the IRS is paying for its operational indiscretions by receiving less money and more restrictions on how it does spend what funds it has.”

 

Paul Neiffer, Section 179 Update (or Not):

 Here are my official updated odds on when we might know what the actual 2014 Section 179 amounts will be:

By Memorial Day 10 Billion to 1

By Labor Day 10 Million to 1

By the November Mid-Term elections 500 to 1

Between the November Mid-Term Elections and December 15, 2014 25 to 1

After December 15, 2014 and before January 1, 2015 1 to 1

After December 31, 2014 5 to 1

I give about 5 to 1 odds in favor of the current Sec. 179 deduction being extended to $500,000 for 2014, and I think that Paul is right that it is most likely to occur during the lame-duck session.  I think odds are about 50-50 on an extension of 50% bonus depreciation. It’s too bad the Feds have closed Intrade, as this would be a betting market I would like to follow.

 

HelmsleyTaxTrials, Leona Helmsley, Angry Employees Strike Back:

Their mistreatment of employees and squabbles over bills are the stuff of legend and left prosecutors rife with eager witnesses when it came time for trial.

Helmsley was just as arrogant about her taxes, famously telling her housekeeper: “We don’t pay taxes, only the little people pay taxes.”  Helmsley participated in several schemes to avoid paying millions of dollar in income and sales taxes.  

Sometimes that sort of thing comes back and bites you; read the post to see how it bit Helmsley.

 

William Perez on an important topic: Tips for Securely Sending Tax Documents To Your Accountant.  First, don’t send anything with your Social Security Number in an unencrypted email.  Like many firms, Roth & Company offers a secure upload platform to send sensitive information.  If your tax firm has one, use it.  They are the safest way to transmit confidential information and files.

 

Phil Hodgen wonders whether there is a Delay in approving renunciations at State Department?  It’s harder to shoot jaywalkers when they are running away.

Missouri Tax Guy goes back to basics with An Introduction to the Double-Entry Bookkeeping System.  Just remember, Debits are on the door side.

Andrew Mitchel has posted a New Resource Page: 2013 Developments in U.S. International Tax

 

Kay Bell, $4 billion more tax breaks for Boeing from Washington State. Taxing you to give money to folks with good lobbyists.

Jim Maule is appropriately annoyed by the use of the term “IRS Code.”  It’s the Internal Revenue Code, and it’s written by Congress, not the IRS.  Remember that when you vote.

Keith Fogg, Qualified Offers – Is it meaningless to offer what you think a case is worth? (Procedurally Taxing)

Jack Townsend, The New Provision for Tax Restitution and Ex Post Facto

 

The Critical Question: Is Kent Hovind A Tax Protester?  It doesn’t seem like a more promising career path for him than his forays into evolutionary biology.

TaxGrrrl, Hot Tub Tax Machine: News Anchor Takes Plea In Scandal.

 

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Tax Roundup, 1/13/14: They’re back edition. And: tax fairy doesn’t show up at appeals court.

Monday, January 13th, 2014 by Joe Kristan


20130117-1
The 2014 session of the 85th Iowa General Assembly begins today.
 It doesn’t look like much tax legislation will pass.

The Governor abandoned a plan to allow taxpayers to choose between the current byzantine Iowa income tax and a lower-rate version with fewer deductions and no deduction for federal taxes paid even before the session started.  He instead will focus on lame feel-good initiatives in an election year, reports Omaha.com:

Gov. Terry Branstad is set to unveil his agenda Tuesday during the Condition of the State address. He said his priorities will include expanding broadband Internet access, fighting school bullying and curtailing student loan debt.

The Governor’s opposition will block any tax reform that isn’t sufficiently punitive to the “rich” — which means any reform worthy of the name.  They will try to change some of Iowa’s worst corporate welfare giveaways, reports the Des Moines Register, but the Governor, an inveterate smokestack chaser and ribbon-cutter, can be expected block any restrictions on using your money to lure and subsidize your competitors.

Meanwhile, trial balloons about increasing the gas tax have already deflated.  That means we can expect a quiet session on the tax front, and a continuation of Iowa’s insanely complex and worthless tax system for another year.  But if they change their minds and want to do something useful, it’s always a good time to talk about The Tax Update’s Quick and Dirty Iowa Tax Reform Plan.

 

tax fairyTax Fairy seeker loses appeal.  A South Dakota surgeon who looked across the ocean for the Tax Fairy found only grief — and the grief wasn’t alleviated on appeals.  The Eighth Circuit Court of Appeals last week upheld the conviction that led to a five-year sentence for Dr. Edward Picardi.

The doctor used a scheme where he “leased” his medical services to an offshore company he controlled to artificially reduce his income by stashing earnings in offshore accounts.  The scheme was promoted to him by an attorney-CPA who has been acquitted of criminal charges in another employee leasing case.

Other taxpayers have avoided fraud penalties from employee-leasing to offshore entities (see here), but not taxes and penalties.  When the best you can say about a tax plan is that you avoided fraud penalties, it’s not much of a plan.  There is no tax fairy.

Prior coverage here.

 

Kay Bell has Important January tax dates, deadlines

 

Lyman Stone, Should Nebraska Follow the Example of Illinois or Indiana?  “The case of Illinois is a great example of how higher taxes can contribute to a worsening business climate, which leads to less jobs.”

Annette Nellen, Marijuana and the Tax Law.  Despite appearances, there is no evidence the lawmakers are smoking something when they write tax laws.

TaxGrrrl, Top 10 Most Litigated Tax Issues.  Number one is penalties.

TaxProf, The IRS Scandal, Day 249

Robert D. Flach offers a SPECIAL OFFER FOR ITEMIZERS!

 

TaxTrials, Famous Fridays: Wesley Snipes, A Lesson in Listening to Bad Advice.  Did he ever.

 

The Critical Question: Massages May Feel Nice, But Can You Deduct Them at the Poker Table? (Russ Fox)

News from the Profession: KPMG Upgrades Its Female Interns From Necklaces to Camisoles  (Going Concern)

 

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Tax Roundup, 11/1/13: Unhappy Halloween for tax shelter maven. And: clunk!

Friday, November 1st, 2013 by Joe Kristan

 

tax fairyGuilty again.  Former Jenkens and Gilchrist tax shelter wizard Paul Daugerdas was again convicted on tax crime charges yesterday arising out of the great tax shelter frenzy of the Clinton and Bush II years.   A previous conviction was overturned on grounds of juror misconduct.  Bloomberg Businessweek reports that he was convicted on seven of 16 counts.

A co-defendant, former BDO Seidman CEO Denis Field, was acquitted.

Mr. Daugerdas built a fortune around tax shelters with clever names like “HOMER,” “CARDs” and “BLISS.”  The shelters typically involved offsetting investment positions, with losses allocated to shelter customers and gains allocated to tax-indifferent offshore entities.  The shelters have fared poorly on exam and in the courts, with a nearly unbroken record of failure in litigated cases.

Mr. Daugerdas built a fortune around selling access to the Tax Fairy, the magical sprite who waves her wand to make tax problems go away.  The news that there is no tax fairy proved costly to his clients, and probably also to him.

Link: Prior Tax Update Daugerdas coverage.

 

20121212-1Clunk.  Cash for Clunkers was an expensive boondoggle, reports the Brookings Institution.  The study estimates that the program cost $1.4 million per “job created” while destroying thousands of perfectly good vehicles and raising transportation costs for those who rely on used cars.

Related:  Braley: “Cash for Clunkers” phenomenally successful (Radio Iowa)

Kyle Pomerleau,  Cash for Clunkers: Not Much of a Stimulus (Tax Policy Blog)

 

TaxGrrrl, IRS Announces 2014 Tax Brackets, Standard Deduction Amounts And More   

 

Paul Neiffer,  Calculating Cost Basis Wrong Can Be Costly!

Peter Reilly,  Actuary In Tax Court Beats Northwestern And IRS On Accuracy Of 1099-R.

Janet Novack, Top Social Security Tax To Rise 2.9% In 2014; Benefits Going Up 1.5%

Tax Trials, IRS Resumes Field Exams & Collections.  The shutdown is truly over.

Phil Hodgen’s  series on the expatriate exit tax continues with Chapter 4 – Are You A Covered Expatriate?

TaxProf,  The IRS Scandal, Day 176

Robert D. Flach is celebrating his 60th birthday with a sale.

 

Howard Gleckman,  As Budget Talks Start, Beware the Bogus Revenue Hikes (TaxVox) “But behind the scenes, Washington’s wink-and-nod crowd thinks it has a solution: Raise new tax revenue—at least on paper—without actually increasing taxes. In fact, some of the gimmicks on the table create even darker Halloween magic.”

Tax Justice Blog, Kansas: Dispatches from a Failing Experiment

 

Going Concern,  Career Conundrum: Is a Master’s Degree Worth It?  It’s all relative.  To me it was, because my it was in Accounting, while my  B.A. was in History — a noble field, but one with grim employment prospects.  If you have an undergrad degree, I’m not so sure it’s worth forgoing a year or two of salary.  If you don’t have a job anyway, it may be the edge you need.

 

Kay Bell, A colorful way to ease IRS notice fears:

Adam Chodorow, however, has an idea of how to ease such tax correspondence induced panic attacks.

Chodorow, a professor at Arizona State’s Sandra Day O’Connor College of Law, suggests color-coding so that taxpayers will immediately know the amount of tax trouble they are in. This, he says, could abate taxpayer stress.

If the IRS could be relied on to issue accurate notices, that would be lovely, but incorrect “red” notices would probably induce a rash of taxpayer heart episodes.

 

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Tax Roundup, 8/30/2013: Same-sex joint return frenzy edition.

Friday, August 30th, 2013 by Joe Kristan

Wed in Iowa, still married in Utah.  The IRS yesterday announced that same-sex couples married legally in any state will be treated as married for tax purposes, even if they reside in a state that does not recognize same-sex marriages.

The IRS also announced that couples that married in earlier years may amend their tax returns to claim joint filing status for open married tax years.  However, they will not be required to.  Couples who extended their 2009 returns have until October 15, 2013 to file amended 2009 returns.  Otherwise, 2010 is the earliest possible open year.

The announcement cuts both ways.  If the IRS says you are married, you no longer have the option of filing as a single taxpayer.  Many couples find that marital bliss comes at a tax price.  This chart from the Tax Foundation illustrates income situations where marriage can be more costly than single status:

Marriage penalty

The opportunity for same-sex couples to choose between single and joint status for open years is unique.   This only goes one way, though; joint filers cannot amend their open years to file as single taxpayers.

Couples who have legal status short of marriage, such as “registered domestic partners” recognized in some states, are not considered married by the IRS.

Other IRS releases on the issue:

Rev. Rul. 2013-17

Frequently Asked Questions For Legally Married Same-Sex Couples  and For Registered Domestic Partners, Civil Unions

Lot’s of coverage of this in the tax blog world.  Iowa’s own Jason Dinesen has long owned this issue, and he comes through with BREAKING: IRS Releases Guidance on Same-Sex Marriage The IRS’s DOMA Guidance: How are Iowa Returns Affected?What if One Spouse in a Same-Sex Marriage Hasn’t Filed Yet? and Will Same-Sex Married Couples Be Required to Amend? 

The Tax Policy Blog has also flooded the zone:

Elizabeth Malm,  Same-Sex Marriages Recognized for Federal Tax Purposes – What Does it Mean for the States?

Nick Kasprak, State of Celebration and Marriage Penalties and Bonuses (Families with Children Edition)

Other coverage:

TaxProf, IRS Recognizes Same-Sex Marriage, Regardless of State

Kay Bell, IRS grants same-sex married couples equal federal tax filing status regardless of where in the United States they live

Trish McIntire, The IRS and DOMA – part 1

Peter Reilly, IRS Recognizes All Marriages But Not Civil Unions

TaxGrrrl, IRS Rules All Legal Same Sex Marriages Will Be Recognized For Federal Tax Purposes   

Tax Trials, IRS Recognizes Same-Sex Marriages in All States

Althouse, “All Legal Same-Sex Marriages Will Be Recognized for Federal Tax Purposes.”

Going Concern, IRS to Recognize All Same-sex Marriages, Regardless of Resident State

Linda Beale,  Same-Sex Married Couples Will be Recognized for Federal Tax Purposes Even When Moving to Nonrecognition State

The Iowa angle: IRS will recognize marriage of same-sex Iowa couples (Des Moines Register)

 

There is a little other news today:

43 percent is the new 47 percent.  And Now for the Movie: Fewer Americans Pay No Federal Income Tax (Roberton Williams, TaxVox):

The percentage of Americans who pay no federal income tax is falling, thanks to an improving economy and the expiration of temporary Great Recession-era tax cuts. In 2009, the Tax Policy Center estimated that 47 percent of households paid no federal income tax. This year, just 43 percent will avoid the tax.
That is good news, as far as it goes.  It’s not healthy to have only a minority paying income tax, the primary funding source for big government.  It’s too tempting to order a double when someone else is picking up the tab.   Mr. Williams thinks that we should count payroll taxes like income taxes, but I agree with Robert D. Flach that they’re not the same thing.

 

Tony Nitti, Tax Aspects Of The NFL Settlement Payments  “Well, if you’re a retired NFL football player, the Blue Book value has been set: your cognitive capacity is worth a cool $150,000.”

Andrew Lundeen,  Why Eliminating Taxes on Capital Would Be Good for Workers (Tax Policy Blog)

Jack Townsend, Another Israeli Bank Depositor Plea to Conspiracy

Robert D. Flach tops off a heroic week with a third Buzz!

 

Perhaps this isn’t the best way to handle an IRS exam.  Tax Analysts reports ($link) on a taxpayer who alleged that an IRS agent coerced him into sex:

Burroughs had sex with Abrahamson in September 2011 when she arrived at his home “provocatively attired,” according to the suit. U.S. Magistrate Judge Thomas Coffin concluded in the July 31 decision that Abrahamson was not acting in her official capacity, because the encounter occurred at Burroughs’s home during nonwork hours and “not in respect to the performance of official duties of the federal employee.”

One survivor of an IRS exam told me that she felt the least the IRS owed her for the experience was drinks and dinner.

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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, 6/27/2013: All apologies edition. And DOMA Carnival!

Thursday, June 27th, 2013 by Joe Kristan

 

Taxpayer Advocate Nina Olsen

Taxpayer Advocate Nina Olsen

Apology payments? The Taxpayer Advocate’s office issued a special report yesterday blasting the IRS treatment of 501(c)(4) exemption applications.  The report also said the IRS apparently violated the law, and its own internal procedures, by having unpublished secret internal guidance on handling the Tea Party cases.The report raises the idea of allowing the issuance of $1,000 “apology payments” for taxpayers who are mistreated by the IRS.

Not a bad start, but far better would be a “sauce for the gander” approach, where the IRS could be subject to penalties for late processing, delays and unjustified positions on the same basis as taxpayers.  If a little charity can be hit with a $100-per-day penalty for not filing a Form 990, the IRS could pay $100 per day for sitting on a 501(c)(4) exemption.  If the IRS takes an unsupported position on an examination, it should pay to the taxpayer 20% of the tax it would have collected through its bogus position.

The TaxProf has more.

Joseph Thorndike, So the IRS Hounded Liberals Too – But We’ve Still Got a Problem (Tax Analysts Blog) I still await tales left-side organization applications left to languish for years or subjected to the grilling applied to the Tea Party groups.

 

Lots of reaction to yesterday’s Supreme Court decision striking down the Defense of Marriage Act. 

Jason Dinesen owns this issue.  He has an extensive practice in Iowa same-sex married couples, and he posted up a storm yesterday:

DOMA Ruled Unconstitutional:

It means couples in same-sex marriages no longer have to jump through the following hoops to meet their tax obligations:

  1. Prepare and file separate federal tax returns as two single people and applying tax law as it applies to single people.

  2. Prepare a “mock” federal return employing tax law as it applies to married people, to see what their tax situation would have looked like if the federal government had recognized their marriage.

  3. Use that “mock” return to prepare their state return as a married couple.

Also, DOMA Done, But Complications Live On and More DOMA Musings — Married But Living in a Non-Recognition State:

IRS Revenue Ruling 58-66 says marital status is determined at the state level and does not change even if you move to a state that doesn’t recognize your marriage… But would this Revenue Ruling from 1958 regarding common-law marriage apply to same-sex couples from states like Missouri or Nebraska who drive to Iowa to get a marriage certificate but who actually live in Missouri or Nebraska, or some other non-recognition state?

The IRS will have to come out with guidance on this and other issues, including:

– A standard procedure for amended returns from same-sex couples who want to obtain joint filing benefits.

– Guidance on the mandatory nature of joint returns for same-sex married couples, and whether it is retroactive.  If same-sex married couples get to choose for open years whether to file jointly or single, is it also an equal-protection violation to deny that choice to double-sex couples?  I doubt it, but that would be fun.

Jason also offers a DOMA Tax News Roundup today.

 

Tony Nitti, Tax Implications Of The Supreme Court’s DOMA Decision: Same-Sex Couples To Be Subject To Marriage Penalty:

The Supreme Court’s ruling is clearly a victory for equality. And from a tax perspective, the decision stands to save meaningful dollars for same-sex couples who will now be defined as married for purposes of the federal estate and gift laws; because the marital deduction will now apply to these couples, spouses will be permitted to transfer assets to each other tax-free during their lifetime or at death.

Kay Bell, DOMA is dead: The effect on same-sex married couples’ taxes

Len Burman, What Will Supreme Court Decision on DOMA Mean for the IRS? (TaxVox)

Let’s assume that half of the newly recognized couples receive bonuses, which means that roughly 50,000 couples might benefit from filing amended income tax returns for 2012, 2011, and/or 2010. If all 50,000 filed amended returns for an average of 1.5 years out of the three this would yield 75,000 amended returns.

Roberton Williams, DOMA’s Demise and Federal Taxes (TaxVox)

Russ Fox, DOMA Done, But Don’t File that Joint Return Just Yet:

The US Supreme Court ruled today that the federal Defense of Marriage Act (DOMA) was unconstitutional.  That makes it appear that same-sex couples should be able to file joint tax returns.  There’s only one problem: The IRS computers likely would reject such a return if it were filed today.

TaxGrrrl, Supreme Court Rules DOMA Unconstitutional (And It Was A Tax Case!)

Nick Kasprak, Joint Filing in the Tax Code (Tax Policy Blog):

Despite the possibility of a penalty, joint tax returns generally provide tax relief, and they’re probably one of the biggest benefits that gay couples can now take advantage of (along with the estate tax exemption, which was at the center of the Supreme Court case).

Joseph Henchman, Supreme Court Decides Same-Sex Marriage Estate Tax Case (Tax Policy Blog)

Robert D. Flach, THE DEATH OF DOMA

Tax Trials, DOMA Doomed by Estate Tax Refund Claim

Linda Beale, Gay Marriage Decisions– As Expected, A Step Towards Full Civil Rights for Gays

 

In other news:

Russ Fox, Loving Appeal to be Heard on September 24th

Jack Townsend, New Taxpayer Advocate Discussion of Problems with IRS OVDI/P Program.  Still shooting jaywalkers.

Paul Neiffer, A Lease Qualifies For Like Kind Treatment But Watch the Fine Print

William McBride, Reducing Tax Avoidance by Reducing Economic Activity: New Zealand’s Failed Experiment with Ending Deferral (Tax Policy Blog)

 

Extortion Watch.  Tennessee Man Indicted for Romney Tax Return Fraud and Extortion Scheme (Department of Justice Press Release)

Legal extortion watch.   Police investigate damage to red light camera.  (Des Moines Register) It’s a tragedy that somebody might have gotten away with not quite coming to a complete stop at an empty intersection.

 

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Tax Roundup, 6/7/2013: Mexican land trust arrangements aren’t U.S. trusts. And don’t settle for just bad enough!

Friday, June 7th, 2013 by Joe Kristan
Flickr image by Christian under Creative Commons license.

Flickr image by Christian under Creative Commons license.

The IRS had good news for many Americans owning property in Mexico.  In Rev. Rul. 2013-14, the IRS ruled that a “fideicomiso” land trust enabling Americans to hold residential property in parts of Mexico is not a trust for U.S. tax purposes.  This means taxpayers who haven’t been reporting these as trusts on Form 3520 aren’t exposed to the $10,000 annual penalty that applies to taxpayers who fail to report their foreign trusts.

Andrew Mitchel: Fideicomisos/Mexican Land Trusts are Not Trusts (Finally)  “Now if the I.R.S. will only conclude the same for Canadian tax free savings accounts (“TFSAs”).”

 

Peter Reilly,  IRS Does Not Spend Enough On Conferences. “Actively trying to demoralize the IRS employees to score political points rubs salt into the wound.”

Don’t settle for just bad enough.  The IRS: It’s Bad Enough (Christopher Bergin, Tax Analysts Blog).

The IRS is seriously and dangerously broken. This is not only unfair to the many dedicated public servants at the IRS; it’s unfair to all of us. Get to the truth. Arbitrarily punishing the IRS isn’t going to help any more than blindly defending the agency. The IRS needs fixing and it needs it now, and that starts with new and strong leadership inside the agency, and a President who is willing to spend the political capital on  IRS reform. We don’t have that President. As for the Republicans, they’d rather turn the IRS into Monica Lewinsky.

Somehow I don’t think the IRS will ever be that cooperative.

Patrick Temple-West,  IRS staff say Washington officials helped direct the probe of tea-party groups (Tax Break)

TaxProf, The IRS Scandal, Day 29.

 

Terrible news for tax practitioners from Russ Fox:  IRS Reportedly Will Close eServices’ Disclosure Authorization Program.  This program saves weeks in solving mystery IRS notices.  Closing it throws sand in the gears of tax compliance.

 

20130607-2Howard Gleckman,  Let Legal Marijuana Dispensaries Deduct Their Business Expenses.  Even when states legalize it, punitive tax rules make it almost impossible to sell legal pot profitably.

 

Brian Maharry, Abusive Tax Shelter Results In $100 Million Assessment

Tax Trials,  Value Matters, Even as Tax Court Denies Conservation Easement Deduction

Fiduciary Income Tax Blog:  FBAR Due Date — 2013.  It’s June 30, kids.

 

In America, we only do this when the Tax Man asks us to.  Italian businessmen drop trou to protest tax collector (Kay Bell)

Child Abuse? Parents to Children: Be a Lawyer, Marry a Lawyer (Jim Maule)

 

TaxGrrrl, Federal Gas Tax Passes Another Milestone: What Is The Future?

We’re closing early to go to the parties.  Happy Birthday to the Federal Gasoline Tax (Philip Hammersley, Tax Policy Blog); Tax Justice Blog,  A Not So Happy 35th Birthday for Proposition 13 But first be sure to catch Robert D. Flach’s Friday Buzz 

 

We were happy to pay him, it was some of his best work.  Another British filmmaker faces jail time for scamming the U.K. film tax credit system in making a film that never made it to the screen, reports the Express:

The scam included a bogus invoice suggesting Kill Bill star Carradine was paid more than £400,000 for 13 days worth of work, even though he had died two weeks prior to the date stamped on the notice.

This is the second criminal film project to hit the news in the U.K.; another one hilariously involved a film thrown together when the operators sensed the authorities were catching on to their scam.  Meanwhile two filmmakers are serving out their 10-year sentences for scamming the Iowa film credit program.  You’d almost think maybe these film credits are just a scam entirely.

 

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Tax Roundup, 5/23/2013: Iowa property taxes improve, income tax gets worse. Plus: more Apple bites.

Thursday, May 23rd, 2013 by Joe Kristan
If Iowa's income tax were a car, it would look like this.

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

The Iowa General Assembly nears the end of its annual rampage.  While it finally did something to improve a bad commercial property tax system, it managed to make an already awful income tax a little worse.

The Iowa Senate cleared a property tax plan (SF 295) yesterday to reduce commercial property assessments by 10%, with additional property tax credits for smaller businesses.  Unfortunately, the price was to more than double Iowa’s version of the fraud-plagued Earned Income Tax Credit and, it appears, to clutter up the 1040 with additional petty tax credits — those these provisions are apparently part of a separate bill.

As if that weren’t enough abuse to the income tax, the Senate also increased Iowa’s tax credit corporate welfare budget by $50 million  (HF 620) by increasing the amount of tax credits that the economic development bureacracy can hand out.  They sweetened the corporate welfare pot by enabling the diversion of employee withholding to local crony capitalist slush funds economic development funds.

Another bill, HF 625, increased the popular school tuition credit, a poor substitute for true school choice.

While the politicians will pat themselves vigorously on the back, the net result isn’t very exciting.  Yes, lower rates for commercial property are needed.  But now Iowa’s dysfunctional income tax is larded with even more corrupt special interest favors, which will make it that much harder to ever enact a system that makes sense for taxpayers without lobbyists and connections.

Related:

David Brunori, Soviets Run Mississippi, Planned Economies and All (Tax Analysts Bl0g)

The Quick and Dirty Iowa Tax Reform Plan.

 

TaxProf, The IRS Scandal, Day 14

Going Concern, Lois Lerner Knows What You People Are Thinking

 

Andrew Lundeen, Apple’s Appearance before the Senate Clarifies the Need for Comprehensive Tax Reform (Tax Policy Blog):

Our average combined rate of 39.1 percent is the highest in the industrialized world. In an increasingly globalized world, this matters more today than it did the last time we reformed the code in 1986. Today the U.S. has to compete with countries around the globe who are constantly improving their tax codes. When the U.S. fails to do so itself, American consumers, workers, and shareholders lose out.

Kyle Pomerleau, Another Perspective on the Apple Hearing (Tax Policy Blog):

Politicians created the current corporate tax system and the current system is broken. If you are going to set out a menu of options for corporations to reduce their tax burden, don’t be surprised or upset that corporations take advantage of them.

Indeed.

 

Linda Beale, Citizen for Tax Justice’s Bob McIntyre on Apple’s offshore profit-hoarding.

 

Robert D. Flach, A KIND OF CATCH-22  On the compliance burden of the fraud-ridden Earned Income Tax Credit.

Tax Trials, See You on Tuesday: IRS Furloughs Impact Certain Filing Deadlines & Services

Kay Bell, IRS offices will be closed Friday, May 24. Plan accordingly

Jack Townsend, Tax Perjury and FBAR Charges Related to Illegal Income Fake Art Case

 

Cara Griffith, A Missed Opportunity in Texas (Tax Analysts Blog)  An attempt to enact an independent tax court in Texas fails:

“The importance of an independent tax tribunal is well documented in the pages of tax journals and even mainstream media outlets.” 

Iowa has nothing like an independent tax appeals process.

Me, Playing with fire: Using an IRA to finance your business.  My new post at IowaBiz.com, the Des Moines Business Record blog for entrepreneurs.

 

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Tax Roundup, 4/24/2013: Maxed Out. And: Internet sales tax vote looms.

Wednesday, April 24th, 2013 by Joe Kristan
Max Baucus

Max Baucus

Depart, I say; and let us have done with you. In the name of God, go!  Chief Senate taxwriter Max Baucus won’t run for re-election.  (Dealbook, via Going Concern).

Sen. Baucus has been either chairman or minority leader of the Senate Finance Committee for decades, and along with his partner in crime, Sen. Grassley, he bears great responsibility for the nightmare the tax law has become, including Section 409A, the Net Investment Income Tax, The First Time Homebuyer credit, Section 199… Good-bye, before you wreck any more trains.

Related:

Linda Beale, Baucus Will Not Run in 2014  (yay!)

Kay Bell,  Senate Finance Committee chairman’s coming retirement could shape tax reform

 

Congratulations to Paul Caron, proprietor of the TaxProf Blog, on his move from Cincinnati to Pepperdine in Southern California.

 

Kyle Pomerleau,  No Surprise: The Overly Complex EITC is Plagued with Billions of Dollars in Improper Payments (Tax Policy Blog)

Patrick Temple-West, Obama budget taxes more Americans, and more

Tony Nitti, Quantifying The Recent Tax Increases: What Is A Wealthy Taxpayer’s “Fair Share?”  As far as some people are concerned, it’s always more than they are paying.

 

Daniel Shaviro,  Senate vote on the “Marketplace Fairness Act”

Howard Gleckman,  Five Things You Should Know About the Online Sales Tax Bill (TaxVox).  He thinks it’s just lovely.

Joseph Henchman,  Senate Voting This Week on Expanding State Authority to Collect Internet Sales Taxes (Tax Policy Blog)

Clint Stretch,  Getting It Wrong: Energy Tax Policy (Tax.com):

Winston Churchill said that Americans can be counted on to do the right thing, after we have exhausted all other possibilities.  He might have added that we usually start with the least direct and most complex approach.  So it is with the energy tax policy expressed in President Obama’s FY 2014 budget.

I like this sentence: “By their nature, tax credits add complexity to the law and often reward behavior that would occur even without the credits.”

 

Robert D. Flach asks, DIRECT DEPOSIT – IS THERE A PROBLEM?

So far two clients have contacted me to report an issue – one with a 2011 refund andone with a 2012 refund.  In both cases the refund was not directly deposited to the requested account.  Instead it was applied to the subsequent year’s estimated tax.  It was as if the taxpayer, or I, had entered the full amount of the refund on Line 75, although we clearly did not.

This isn’t a problem I have seen.  Robert famously doesn’t e-file his returns.   I wonder if it’s a simple keypunch error at the service center.

Jason Dinesen,  In a Same-Sex Marriage? Watch Your Federal Tax Withholding

Jim Maule, Putting It in Writing Makes Good Tax Sense.  If you use the right words, of course.

Peter Reilly, How To Shatter The Public Accounting Glass Ceiling ?  Sometimes I think it’s that women see the hours and stress involved and wisely say “screw this.”

 

TaxGrrrl, Ready Or Not: Lauryn Hill Sentencing For Tax Evasion Postponed

Tax Trials,  Tax Court: Second FPAA Invalid, Cannot Confer Jurisdiction

Robert D. Flach is buzzing again!

 

I love my hometown: Elvis impersonator engages police in 30-hour standoff in Des Moines (RawStory.com, via The Beanwalker)

Stoned people should not throw glass bongs in houses.  Glass bong breaks two state windows (Jason Clayworth)

 

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Tax Roundup, 4/23/2013: How not to make money as a lawyer. Also: report pegs EITC fraud at up to 25%.

Tuesday, April 23rd, 2013 by Joe Kristan

20130423-1The legal business must really be getting tough, if lawyers have to resort to the lamest lame tax fraud scheme out there.  A Monroe, Louisiana attorney named Francis Broussard has pleaded guilty to attempting to claim over $9 million through the “1099-OID” fraud.  From thenewsstar.com:  

 According to the Stipulated Factual Basis in the plea agreement, Broussard, who has been licensed to practice law in Louisiana since 1986, had his accountant prepare his 2005 through 2007 tax returns, but the defendant never filed them. Broussard did present the documents to various financial institutions in efforts to obtain personal loans and other types of financing. In 2009, the defendant went to a different tax preparer to have his personal tax returns prepared for 2005 through 2008. The defendant brought already prepared federal tax returns along with a separate piece of paper with a set of numbers on it. The defendant instructed the preparer to use the set of numbers on Forms  1099-Original Issue Discount (OID) and on the Schedule B, Interest Income section of the form. The defendant’s fraudulent claim is based on  the OID interest income.

The 1099-OID scheme is, to the extent it is coherent at all, based on the idea that government has a big cash stash for each of us.  They don’t want us to know about it, goes the theory, but we can tap into it if we just fill out the right tax forms.  It’s not surprising that people fall for it — heck, we fall for big delusions every time we vote — but it is surprising that a lawyer would give such a preposterous scheme a try.

 

TaxProf,  TIGTA: IRS Fails to Comply With Mandated Reduction in Improper Payments — 25% EITC Fraud Costs $14 Billion/Year. The earned income tax credit is a fraud magnet because it is “refundable” — if it exceeds your tax for the year, the IRS writes you a check.  That makes it a welfare program run through the tax system.  EIC advocates say it is a critical help for struggling families, but when that much is stolen from the program in a year, you have to think there is a better way.

 

Howard Gleckman,  High Income Households Would Pay Most—But Not All—of the New Taxes in Obama’s 2014 Budget  (TaxVox).  Just more evidence of the unseriousness of the budget.  The rich guy isn’t picking up the tab.  He can’t.

Jeremy Scott, How Important Is Deferral to Multinationals? (Tax.com)

Tax Trials,  Mark Your Calendars: IRS Closes for 5 Days Under Sequestration

 

Patrick Temple-West,  Businesses become REITs to avoid taxes, and more.  That works great if you can live with at least 100 shareholders, and no five together own over 50%.

Robert D. Flach,  MORE ON THE NEW “SAFE HARBOR” HOME OFFICE DEDUCTION

Trish McIntire,  Do Overs.  You can amend a tax return if you need to.

William Perez,  Obama’s and Biden’s Tax Returns for 2012

Kay Bell,  Celebrate Earth Day by exploring environmental tax breaks

 

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Tax Roundup, 4/22/13: IRS unpaid holidays. And buying a round for the State.

Monday, April 22nd, 2013 by Joe Kristan

Sharing your drink with the state.  The Tax Foundation maps how happy your state is when you wet your whistle:

 

20130422-1

Iowa is #6.

 

 

Just because an LLC is taxed like a partnership doesn’t mean that every LLC owner can act like a general partner, as Colleen MacRae explains:

Last week the Iowa Court of Appeals in Three Minnows, LLC v. Cream LLC, held that a non-managing member did not have the authority to bind an LLC to a contract the member signed on behalf of the limited liability company. 

Not every LLC member can obligate an LLC.

 

TaxProf,  IRS to Close to Public for Five Days Due To Employee Furloughs.  That doesn’t mean the Public can close to the IRS for five days, unfortunately.  Yet another example of how the preparer regulation initiative is a colossal waste of agency resources needed elsewhere.  Related: David Cay Johnston, IRS To Close for Five Days (Tax.com).

 

Peter Reilly,  IRS Not Screening Informant Reports Well .   They have other priorities than dealing with the tax collection opportunities dropped right in their laps.

 

Jim Maule,  The “Rain Tax”?

Kay Bell,  World governments mounting global effort against tax evasion.

TaxGrrrl,  As Many Celebrate 4/20, Feds Still Won’t Budge on Regulation and Taxation of Marijuana.   As long as Sec. 280E keeps even legal pot dealers from deducting expenses, it will be a tough business to make a living in, after tax.

Martin Sullivan, Horse Racing and International Tax (Tax.com)

Russ Fox,  Bayern Munich Head Reports Self for Tax Evasion.  Swiss bank accounts are involved.

Tax Trials,  IRS Announces Special Filing Extension for Boston Area Taxpayers

 

The Critical Question:  Is There Such Thing as a Free Lunch? (Ellen Kant, Tax Policy Blog)

 

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