Posts Tagged ‘the rich guy’s not buying’

Tax Roundup, 10/2/2013: essential government function edition. And… commas!

Wednesday, October 2nd, 2013 by Joe Kristan
Wikipedia image courtesy Tallent Show under Creative Commons license

Wikipedia image courtesy Tallent Show under Creative Commons license

A bunch of federal government workers stayed home yesterday, but enough showed up to try to keep some 90-year olds off the grounds of the World War II memorial in Washington.  They will try to stand up to the guys in wheelchairs again today.  That must be one of those essential government functions.

 

Today’s shutdown roundup:

Kay Bell, Government shuts down. Who, besides citizens, will pay?

Janet Novack,  Federal Government Begins First Shutdown In 17 Years 

TaxGrrrl, Congress Marches Towards Shutdown, Spares Military   

Tax Trials, Tax Court Filing Deadlines during Government Shutdown

Joseph Thorndike, The GOP Is Right About One Thing: Ditch the Medical Device Tax (Tax Analysts Blog):

Narrow excise taxes — even when somehow correlated with special benefits — are not a good way to fund major social programs. Broad programs deserve broad taxes.

True.  But the political magic behind ACA was the idea of a “free” mass welfare benefit  – free to you, anyway, because some rich guy gets the tab.  But as Joseph has pointed out, the rich guy isn’t buying.

Len Burman, Would the Government be Shuttered if Obamacare were Romneycare?

Russ Fox,  The Government Shutdown and Taxes

 

Jason Dinesen,  Life After DOMA: Audits of Prior-Year Returns.  Jason explains how audits work for amended returns of same-sex married couples.

William Perez, How Social Security Benefits are Taxed by State

Jim Maule, Failing to Keep Those Records Can Increase Taxes

It is not implausible that the taxpayers paid more than $2,052 for the support of the wife’s mother. Certainly during the time when she was living with them, a portion of the costs of maintaining the taxpayers’ residence constituted support of the wife’s mother. But apparently the taxpayers did not offer any evidence of those costs.

It’s up to the taxpayer to keep the records needed to support your tax return.

 

TaxProf, Supreme Court Grants Cert. to Decide Whether Severance Pay Is Subject to Payroll Tax.  Is being paid to go away taxed the same way as being paid to work?

Peter Reilly, Court Rules Against Slots Playing As A Business 

Tony Nitti, The Real Winner In The Breaking Bad Finale: The IRS   

 

tax fairyPhil Hodgen, Sooner or later, secrecy fails as a tax planning strategy:

Americans: secrecy is a weak tax planning strategy; stop using it.

What seemed like a good idea 10 years ago has now compounded itself into a seemingly intractable dilemma. I know this because people tell me so every day.

Start looking for what is true, not what you want to be true. When you hear the answer, accept it. Swallow and digest the big chunks of truth.

In other words, there is no Tax Fairy

 

 

Jack Townsend,  Article on DOJ’s Swiss Bank Initiative

Keith Fogg, Representing Clients in Tax Court (Procedurally Taxing)

Robert D. Flach, SOME REMINDERS

 

News from the profession.  BREAKING: Commas To Be Added to the CPA Exam (Going Concern).  “We are adding a comma to the calculator on the CPA Exam. The comma is meant for large numbers such as 1,000 and above to make them easier to read.”  Calculators.  With commas. In my day when we took the exam, we had “fingers.”

 

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Tax Roundup, 9/18/2013: No, the rich guy still isn’t buying. And non-phony scandals.

Wednesday, September 18th, 2013 by Joe Kristan

taxanalystslogoJoseph Thorndike gets a lot wrong in Two Cheers for a Government Shutdown (Tax Analysts Blog), but he gets one important thing exactly right (my emphasis):

 Democrats have been much less willing to defend discretionary government spending — the kind of spending that will grind to a halt during a shutdown. The discretionary portion of the federal budget has been slashed to the bone in recent years, and it’s slated for more slashing in the years ahead.

Those cuts are bad for the country in any number of ways. But until Democrats make the case against them, they’ll keep coming.

And here’s the most important point: Defending the value of discretionary spending also means defending the taxes that pay for it. Yet Democrats have been unwilling to defend taxation for decades. Ronald Reagan really was a transformative president — he changed not only the way Republicans talked about taxes, but the way Democrats talked about them, too.

Democrats have always liked taxing the rich. But for decades, they understood that you couldn’t tax only the rich. Anyone who thinks seriously about solving our long-term budget problems comes to the inescapable conclusion that taxes are going up for everyone. At least they will be going up if we hope to continue with a federal government that looks anything like the one we have today.

20121226-1Democrats have to embrace that fact. They have to defend the value proposition of progressive government, not just the feel-good politics of progressive taxation. 

I don’t buy for a moment that discretionary spending has been “slashed to the bone.”  Just visit your friendly money-bleeding post office, airport TSA line, high-speed rail boondoggle, solar subsidy disaster…  But he is exactly right when he points out that the rich guy isn’t buying.

 

Chart by the Tax Foundation

 

When the “Rogue Agents in Cincinnati” defense of the IRS in the Tea Party scandal was discredited, those attempting to minimize the scandal fell back to new defensive positions:

There is no evidence of partisan bias, and

Progressive groups were targeted too.

These assertions appear in a USA Today Story (via Instapundit), IRS list reveals concerns over Tea Party ‘propaganda’.

 Newly uncovered IRS documents show the agency flagged political groups based on the content of their literature, raising concerns specifically about “anti-Obama rhetoric,” inflammatory language and “emotional” statements made by non-profits seeking tax-exempt status.

More than 80% of the organizations on the 2011 “political advocacy case” list were conservative, but the effort to police political activity also ensnared at least 11 liberal groups as of November 2011, including Progressives United, Progress Texas and Delawareans for Social and Economic Justice.

Progressive outfits are unlikely to be caught by a screener looking for “anti-Obama” rhetoric. Given that “over 80%” of the groups picked for extra screening are right-side, it’s hard to accept that there is no political bias in the screening process.  Prior revelations have shown that the few left-side groups that were picked for extra scrutiny got very gentle treatment compared to their right-side counterparts:

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

Nothing phony about this scandal, no matter how much some people devoutly wish otherwise.

 

TaxProf, The IRS Scandal, Day 132

Russ Fox,  IRS Scandal: Lerner, Others Re-Enter Spotlight

 

 

Lynnley Browning, Complying With U.S. Tax Evasion Law Is Vexing Foreign Banks (via the TaxProf).   It’s one more reason why foreign banks are closing their doors to U.S. expats, and why Americans abroad are turning in their passports.

 

Paul Neiffer,  IRS Has Two Sets of De Minimis Rules.  He is discussing final regulations issued last week on what purchases need to be capitalized, rather than written off as expenses:

The first set applies to companies with applicable financial statements (i.e. an audit) and allows the company to expense any fixed asset purchase that does not exceed $5,000.  The second set allows any other taxpayer to expense any fixed asset purchase that does not exceed $500.  Personally, I would have hoped this number would be closer to $2,500, but $500 is better than none.

The Regulations also provide for guidance to IRS agents that they can reach an agreement with a taxpayer during audit to use a de minimis number higher than the ceiling in the Regulations.

I think the distinction between audited financial statements is nonsensical, but at least taxpayers know where they stand.

 

Jason Dinesen: Having a Side Business in Multi-Level Marketing Doesn’t Make Personal Expenses Deductible.  It’s amazing how many people believe that it does.

 

Kay Bell,  Tax deadlines extended to Dec. 2 for Colorado flood victims

Tony Nitti, IRS Provides Tax Relief To Victims Of Colorado Storms   

Trish McIntire,  Disasters and Chutes and Ladders

TaxGrrrl,  2014 Tax Brackets, Exemption Amounts Likely To Save Tax Dollars   

William Perez,  Top Tax Rate Paid by Sole Proprietors by State

Brian Mahany,  Do You Have The Right To Rely on IRS Forms? Court Says “Maybe”

David Brunori, The Conundrum of Taxing Lots of Kids (Tax Analysts Blog)

 

20120924-1

Phil Hodgen, Simplicity:

Reaching for $1,000X of tax savings frequently costs you $2,000X in accounting and legal fees to make the IRS all warm and fuzzy on your tax returns. We saw this last week where a prior year tax election was made that saved $5,000 (!) of tax, but so far has cost $40,000 to fix. Not to mention the time distraction for the principal of the venture.

That’s why I don’t care for things like C corporations that try to manipulate their income to use the lower tax rates when income is under $100,000.  You can save maybe a few thousand in taxes if you do it just right, but at the cost of professional fees and management time best spent elsewhere.

 

The Critical Question: Is the Spies Element for Evasion (i) Tax Deficiency or (ii) the Criminal Tax Number? (Jack Townsend)

 

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Tax Roundup, 1/24/2013: Tax increases for everyone, anyone? And more bad news for tax season!

Thursday, January 24th, 2013 by Joe Kristan

 

Tax Foundation graphic.

TaxProf,  NY Times: it Is Time to Raise Taxes on Everybody — Including the Middle ClassPaul Caron links to a New York Times Op-ed:

To make ends meet, both parties agree, spending must be drastically cut. Under the White House budget proposal, discretionary spending on everything except the military is projected to shrink to its smallest share of the economy since the Eisenhower administration by the beginning of the next decade. Though he has resisted Republican demands to slash entitlements, President Obama remains willing to look for further savings from Medicare.

This is not, however, the only option we have. There is an alternative: raising more money from all taxpayers, including the middle class.

Nobody wants to talk about this. … Yet Americans would benefit from a discussion of this possibility.

It’s not true that “both parties agree” that spending must be drastically cut.  It’s not clear that either party, as a whole, admits it, and at least one party remains in firm denial.  The President’s campaign was all about spending money and sending the bill to the rich guy.  Still, it’s nice that finally somebody at the New York Times admits that the rich guy isn’t buying.  He can’t.

 

Janet Novack,  As IRS Tax Filing Season Begins, Bad News For Honest Taxpayers.  She20130121-2 speaks with Taxpayer Advocate Nina Olson.  The article has some depressing truth:

Customer service at the Internal Revenue Service is dismal and deteriorating. (Only 68% of telephone callers who wanted to talk to a human at the IRS last tax filing season eached one, and then only after an average 17 minute wait.)  The epidemic of identity theft refund fraud hasn’t yet been contained.  Hope for a major reform that might simplify the tax code is waning.

The article also has some serious nonsense about last week’s ruling shutting down the IRS preparer regulation power grab:

“If the injunction stands, the taxpayers of the United States will be grievously harmed,” IRS National Taxpayer Advocate Nina E. Olson told Forbes. “The practical effect of not having some kind of consumer protection for taxpayers going to return preparers is enormous. And I say that seeing all the return preparer fraud, and the return preparer negligence, and the return preparer inadvertent mistakes that happen.”

Enormous?  More like what we did forever until two years ago.  If anybody has evidence that last year’s tax preparers were significantly more accomplished and accurate than they were before the regulations, they haven’t shared it.  And the idea that the RTRP literacy competency test and minimal CPE requirement would have changed that is silly.

Ms. Olson believes that depriving consumers of choices in preparers is in their interest because the diminished choices would be better.  That flies in the face of all we know about regulation.  The net result would be higher prices, driving more taxpayers to do their returns and driving some on the margins out of the system altogether, while sending more business to the big franchise tax prep outfits.

 

Robert D. Flach, TAX RETURN PREPARER REGULATION, LICENSURE, AND/OR CERTIFICATION.  Robert’s magnum opus on how tax preparers should be regulated.

While I agree that having the Internal Revenue Service regulate tax preparers is not the best option – it is without a doubt a far superior option to having Congress legislate regulation.  My opinion of the intelligence, competence, and ability, or rather lack of intelligence, competence, and ability, of the current members of Congress is well known.
The optimal source of tax preparer regulation/licensure/certification, whether mandatory or voluntary, would be an independent industry-based organization, not unlike the AICPA or ABA, such as the National Institute of Registered Tax Return Preparers that I have proposed.

Robert also calls me out:

As I have asked in response to Joe’s assertion, would you want a “casual” electrician wiring your kitchen, or a “casual” dentist filling a cavity, or a “casual” architect designing your home?

If I do, what business is it of anybody else?  If I want to pay a talented handyman neighbor or cousin to install a ceiling fan for me, why is it anybody’s business?  Why should he be not allowed to take my money just because he doesn’t have an electrician card from the Bureau of Electrical and Mortuary Science?  As TaxGrrrl noted yesterday, occupational licensing is taking over the economy, and that’s not a good thing.

 

TaxGrrrl, With A Week To Go, IRS Talks Opening Day and Refunds

 

Cara Griffith, Have State Income Taxes Run Their Course? (Tax.com)

The corporate income tax is inefficient and a not sufficiently stable source of revenue for states. It should be eliminated. The individual income tax is likewise not a particularly stable source of revenue for states, and while counterintuitive, progressive tax systems do not work well at the state-level. Income redistribution, to the extent that it should be a goal at all, should not be undertaken at the state-level. So  in a perfect world, yes, the state individual income tax should be eliminated as well.

Christopher Bergin agrees.

 

Good. Another bid to ban traffic enforcement cameras in Iowa. (O. Kay Henderson, via The Beanwalker).  Traffic cameras are your local government’s most sincere way of showing their contempt for you.

 

Trish McIntire,  Form 8332 and Fairness.  How the IRS enables bitter ex-spouses.

Paul Neiffer,  Why Imputed Interest Matters For 2013 (And Beyond)

Kaye A. Thomas,  Another Demutualization Case

Robert W. Wood, Golfer Phil Mickelson Is Not Alone In Fleeing Taxes (Via Kerry Kerstetter)

Peter Reilly, Why Phil Mickelson’s Remark Was Really Dumb

Brian Mahany, Is FATCA In Trouble? Unfortunately, NO

Joseph Henchman,  CBPP’s Misleading Chart on Debt Stabilization (Tax Policy Blog).  A study in cherry-picking.

Jen Carrigan, Should Capital Gains Be Taxed Differently? (Guest post at The Missouri Taxguy blog).

Patrick Temple-West,  Firms keep stockpiles of ‘foreign’ cash in U.S., and more

Tax Trials,  District Court Decision Prevents IRS from Regulating Certain Tax Return Preparers

Kay Bell,  Fiscal cliff tax provision could help stem fraudulent refund claims by prisoners

 

News you can use:  Passing the CPA Exam While Billing Over 2500 Hours in a Year Is Way Harder Than Having a Baby(Going Concern).  Also less useful and not as smart.

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Tax Roundup, 12/27/2012: Why the rich don’t like being soaked. And how to make a fortune by copyrighting your name!

Thursday, December 27th, 2012 by Joe Kristan

 

From a Tax Foundation chartbook, “Putting a Face on America’s Tax Returns”

What happens as you ratchet up the top rate. A timely explanation of the effect of raising already high tax rates from Megan McArdle:

Taking your tax rate from 5% to 10% decreases your after tax income by 5.26%.  But by the time your tax rate is 50%, you’re only keeping half of your income.  So increasing the tax rate by 5% decreases your after-tax income by 10%: you used to take home 50 cents out of every dollar, but now you only take home 45 cents.  

If you were surprised that Gerard Depardieu decided to leave France rather than pay the new 70% top rate, think of it this way: the rate increase was only 30%, but it was going to cut his income in half. Yes, that would still leave him with more money than you and I live on.  But people don’t think this way: if the government came and took half your after-tax income away, that would still leave you with more money than a middle-class family in Bangalore lives on, and you would still be hopping mad, not to mention panicking about how the mortgage was going to get paid.  Even if they only took half of your marginal after-tax income away–an extra 50% of every dollar you made over $40,000 say–you would be pretty upset, because you’ve probably already earmarked uses for those dollars.

With the people in the highest-income states already pushing a 50% marginal rate under current law (and also, under what I take to be the negotiation outcome desired by most of the Democratic Party), every 10% tax hike is a 20% decrease in the after-tax value of extra work.

Applying that analysis to Iowa, the combination of the fiscal cliff and the Obamacare 3.8% “net investment income” tax can reduce the after-tax value of additional income of a top-rate Iowa taxpayer by 12.24%  — about 1/8.   For Iowa businesses that pay their taxes on owner returns — that is, partnerships, LLCs and S corporations — that’s a 1/8 reduction in their cash flow, their ability to finance expansion, their ability to service new debt.  It’s also a 1/8 reduction in the returns to taking a chance on a new product, a new location, a new employee.  That makes for fewer chances taken.

Worse, soaking the rich doesn’t even begin to solve the spending problem or close the deficit, no matter how hard you try.  The rich guy isn’t buying.

 

Fiscal Cliff Notes

Veronique de RugyA Little Symbolism to Fight Fiscal Denial (The Corner)

TaxGrrrlTreasury Advises That U.S. Will Hit Its Debt Limit In 5 Days

 

Cara Griffith,  The Promise of Tax Stability (Tax.com).  For one company, anyway; tough for the rest of Oregon.

Peter Reilly,  Retired IRS Officer Launches Petition Against Clergy Tax Benefit

Robert D. FlachWHAT’S NEW FOR NJ INCOME TAXES FOR 2012

Anthony NittiThe Top Ten Tax Cases Of 2012, #1: Obamacare Is Constitutional Because The Individual Insurance Mandate Is Both A Penalty And A Tax. Wait…What?

Romney won?  How You Can Lose Money on Paper And Still Win at Tax Time Like Romney (TaxGrrrl). 

As bad as today’s news is, it could be worse.  And it was, actually, as Don Boudreaux reminds us in  Cataloging Our Progress: Men’s Business Wear (Cafe Hayek)

 

Yeah, that’ll work.  Man jailed in federal tax fraud, bills paper for using his ‘copyrighted’ name.   A convicted tax cheat sent a $6 million invoice to the local paper for using his name twice in a news story reporting his guilty plea on tax charges.  Doesn’t he know that if he collects they’ll send him a 1099? (vindy.com)

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Tax Roundup, 12/24/2012: the coming preparer crash. Also: a modest fiscal cliff proposal.

Monday, December 24th, 2012 by Joe Kristan

20121224-1IRS preparer rules may create a catastrophic preparer shortage.  A press release last week from the IRS urging preparers to take the new Registered Tax Return Preparer examination saves the real news until the end (my emphasis):

So far, there are more than 48,000 preparers who have earned RTRP certificates. There also has been an increase in the number of people taking the enrolled agent exam.

Starting Jan. 1, 2014, only registered tax return preparers, enrolled agents, CPAs and attorneys will be authorized to prepare and sign federal individual returns.

There are currently 739,000 tax preparers with 2012 PTINs. Approximately 350,000 of them are subject to the new testing and CE requirements.

It’s likely the population of authorized return preparers will crash.  That will increase demand for the big national tax preparation franchises, which probably was the real goal the new regulations – written by a former president of H&R Block.  A reduction in preparer supply will increase prices.  It will cause some taxpayers on the margin to prepare their own returns, and some to stop filing altogether.  Hardly a step forward for tax administration.

UPDATE, 12/27: The IRS Regulates Mom-and-Pop Tax Preparers Out of Business, Just in Time for Tax Season!

 

Tyler Cowen: point out that the rich guy isn’t buying.  The economist makes an interesting suggestion for the GOP now that “Plan B” has failed (my emphasis):

 To see how this could work, consider this script: Let’s say the Republicans decide to largely give in to what the President Obama is proposing. There is, however, a catch: the president has to agree to raise marginal tax rates on all income classes, not just on the rich.  The tax increase would be one-quarter of a percentage point, or some other arbitrary small amount, with larger increases possible for higher incomes, as has been discussed. The deal also stipulates that both the president and Congress must publicly acknowledge that current plans for government spending can’t be financed unless taxes on most or all income groups climb further yet, and by some hefty amount.

This highlights the frivolous, depressing and maddening nature of the “Fiscal Cliff” crisis. They will solve nothing, regardless of the outcome.  The President resolutely ignores the continuing fiscal catastrophe.  Nothing he proposes pays for more than rounding error in federal spending.  His only concern is scoring political points, not solving the problem.  A demoralized GOP lacks the nerve, and perhaps the conviction, to call for the spending cuts needed to approach fiscal sanity.

Of course,  “The Rich” simply don’t have enough money to pay for our incontinent government.

 

Joseph Henchman:  Switzerland “Debt Brake” As Consensus Policy Option for America? (Tax Policy Blog)

 

Fiscal Cliff Notes:

Kay Bell,  Average tax bill increase if we fall off the fiscal cliff? $3,446

Patrick Temple-West,  Boehner’s budget ‘Plan B’ collapses, and more (Tax Break)

Janet Novack,  Obama Plays The Adult In The Room–Before Leaving For Hawaiian Holiday

Peter Reilly,  All I Want For Christmas Is An AMT Patch.  Me too.

Trich McIntire,  Congressional Con

Jim Maule, Tax Pledges: Never Say Never.

 

He’s a little people now.  From an FBI press release:

John J. McCauley Jr., 54, owner and co-operator of McCauley and L’Europa  Public Adjusters LLC and PIA Restoration LLC in Providence Rhode Island, and longtime Rhode Island state legislator, was sentenced today to 27 months in federal prison for conspiracy to defraud the United States of more than $500,000 and filing false tax returns…

Like some other politicians, he can take the taxes, but he can’t dish them out.  He was Deputy Speaker of the Rhode Island House, according to this report.

 

TaxProf, Deconstruction Deduction:  Home Disassembly and Charitable Donation Rather Than Demolition Yields Big Tax Savings

Jason Dinesen, New Preparer Requirements on Earned Income Credit = Higher Fees for Clients

12 Days of Charitable Giving 2012: Fisher House Foundation

Jack Townsend, Evasion of Payment Statute of Limitations Runs from the Last Affirmative Act

Russ Fox,  Fat Joe Takes the Rap

Merry Christmas!  TaxVox’s 2012 Lump of Coal Awards  (Howard Gleckman)

Wow.  From the TaxProf:

Yesterday morning, my son was on a bus on I-80 with 52 other Grinnell College students heading to the Des Moines airport to fly home for the Christmas holiday when the driver suffered a fatal heart attack.  The bus veered off the highway to the right, into a snowbank from the 12 inches of snow that fell in Iowa last Thursday.  Miraculously, none of the students were injured, and after being transported to the hospital in Newton, Iowa, Grinnell arranged for alternative transportation for the students to the airport.

My older son drove that route yesterday coming home from school in Chicago.  Happily, his trip was unexciting.  I hope all of you who are traveling this week arrive safely.

 

That would be sexy indeed.  Too Sexy for Iowa  (The Other McCain).

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Tax Roundup, 12/5/2012: Happy Repeal Day! Too bad it’s not the tax code.

Wednesday, December 5th, 2012 by Joe Kristan

Happy National Repeal Day!

 

Either we cut spending or everyone will pay more taxes.  This post by Veronique de Rugy puts together in one handy package some points I have been trying to drive home about budget and tax policy.  It’s all worth reading, but some key items include:

 In my opinion, the problem with the fiscal-cliff debate has been that no one is acknowledging the fact that there is no way out of raising taxes on everyone eventually unless Congress gets serious about addressing our long-term fiscal problem, by restraining spending.

“The Rich” simply don’t have enough income to foot the bill.  But borrowing temporarily hides the problem:

This, by the way, is why I thought the Bush years were so toxic. Cutting taxes while increasing spending dramatically — Bush increased real spending by 60 percent, as opposed to Clinton’s increase of 12.5 percent — is a recipe for large deficits leading more taxes later or certainly intense pressure to raise taxes.

What will taxes look like when the bill comes due?

This weekend, Mark Steyn gave us an idea of what that tax bill would look like. He writes:

A couple of years back, Andrew Biggs of the American Enterprise Institute calculated that, if Washington were to increase every single tax by 30 percent, it would be enough to balance the books — in 25 years. If you were to raise taxes by 50 percent, it would be enough to fund our entitlement liabilities — just our current ones, not our future liabilities, which would require further increases.

Finland shows how high taxes have to be to adequately fund a lavish welfare state, as I have noted:

Finland has an extensive welfare state and most years pays for it without budget deficits.  It does so with income taxes that reach a 2012 top rate of 29.75% at €70,301, which is about $57,021 at current exchange rates.  For a US taxpayer filing single, the 28% rate doesn’t start until taxable income reaches $85,651, and not up to $142,701 on joint returns.  On top of that, Finns pay a 23% Value-added tax on most purchases — a tax that is not tied to income.  But there’s more!  There is a mandatory 4.7% payroll tax on employee gross wages, plus another 18.3% “paid” by the employer — but that necessarily reduces what they can pay the employee after-tax.

I’m not sure all that would go over well here, but that’s what we’re headed for.  Anybody who says rich people can pay for all of the free government stuff is either clueless or lying.  The rich guy isn’t buying.

 

Megan McArdle,  Who Gets More Damaged If We Go Over the Fiscal Cliff?  At least there’s a drink at the bottom.

At least the weather’s nice.  Oh, maybe not…  Top Federal Marginal Tax Rate Will Exceed 50% in California, New York, and Hawaii in 2013 (TaxProf)

Amy Feldman,  Getting ready for the Medicare tax on investment income   (Reuters)

Don’t think he actually plans to pay the higher taxes he supports.  Warren Buffett Makes Money On Tax Breaks He Discredits (Steve Stanek, IBD)

Joseph Thorndike, Moral Abdication Dressed Up Like Hard-Nosed Realism (Tax.com)

 

But think of the intangible benefits of the Iowa film tax credit program! Film financier sues state over unpaid film credits (AP)  The producer of one of the films involved in the suit pleaded guilty to felony chargesarising from tax credits for the film.

Joseph Henchman,New York Times Tells the Tale of Michigan’s Bankrupt State-Backed Film Studio (Tax Policy Blog Oh, and Happy 75th Birthday to the Tax Foundation! 

 

Kay Bell, Tax Carnival #109: Tax Stocking Stuffers

TaxGrrrl,  12 Days of Charitable Giving 2012: Be An Elf

Russ Fox,Nominations Due for 2012 Tax Offender of the Year.  ‘Tis the Season!

Must be a Cubs fan. Hapless Mr. Williams Loses Again (Jack Townsend)

Nor do I.  No, I Don’t Plan to Take the RTRP Exam (Jason Dinesen). 

Jim Maule, The Hidden Government Spending Game.  Spending doesn’t become something else just because you run it through a tax return.

Trish McIntire, Do You Have a Spare $2,350?  You do?  Good, you may need to send it to the IRS in April if Congress doesn’t “patch” the Alternative Minimum Tax for this year.

Peter Reilly, Hobby Losses – Need To Convince Tax Court You Love Money More Than The Game

Robert D. Flach has his Wednesday Buzz roundup of tax posts up!

 

 

Holistic auto healing?  Cadillac chiropractor sent to prison for tax fraud  (Mlive.com)

The Critical Question:  Bartlett: The Fiscal Cliff and the Debt Limit — What Would Lincoln Do? (TaxProf)

Judge Holmes Quote of the day. 

Allison T. O’Neil, the ex-wife of Michael J. O’Neil, does not want to pay a penny of their joint 2005 federal tax liability because, she says, it [*2] would be inequitable to make her do so.

2 Michael recalls providing Allison with $6,000 to $10,000 per month. Allison recalls getting only $6,000 per month.

Cite: O’Neil, T.C. Memo 2012-339

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Tax Roundup, 12/3/2012: Medicare 3.8% tax guidance issued. Meanwhile, to the cliff!

Monday, December 3rd, 2012 by Joe Kristan

The IRS issued proposed regulations for the 3.8% Obamacare tax on investment income Friday.  I will do detailed posts on the in the coming days as I study them.

I’ll note two important items from my first overview of the proposed rules:

  • The rules allow taxpayers a free opportunity to redo their activity “grouping” elections for the passive loss rules for 2013. ”Passive” business activities are subject to the the 3.8% tax.  Because “passive” status often depends on how much time a taxpayer spends working in a business, how different operations or locations are grouped can determine whether they are passive.
  • The rules appear to allow you to pro-rate state income taxes in determining “net” investment income.  That’s taxpayer-friendly, but it adds another level of complexity.

For an initial take on the rules, see Anthony Nitti at Forbes.

Related:   Obamacare: it’s a tax!

 

David Brunori of Tax Analysts on the fiscal cliff discussion:

     Everyone knows that taxing the very rich will have no perceptible effect on the deficit. It’s all for show. The president and Democrats in Congress can say they stuck it to the millionaires and billionaires. Fairness will abound. The Republicans can tell the world that they are reasonable people willing to compromise on issues as important as taxes. But Americans will still get more government than they are willing to pay for.

     Some liberals have called for us to go over the cliff and to raise taxes across the board. Like Norquist, they are miscalculating. If everybody had to start paying more, there would be a lot more questioning of massive defense spending, egregious subsidies for industries, and entitlements run amok. But for now, we must be content with the rich paying more so we can get more than we deserve from our government.

You can’t pay for mass welfare benefits with a class tax.  The mania for taxing “the rich” is a distraction from the enormous tax increases on everybody that will be required.  The Rich Guy’s not buying.

 

Why the fiscal cliff is such a big fall.  The Bush Tax Cut Issue in One Chart (Ed Krayewski, Hit and Run):

He adds:

And for those who would say “well of course the government has to spend more when the economy is hurting” only one question applies: has it helped? If you think so, I’ve got a tiger-repellant rock to sell you.

Related:  ‘Fiscal Cliff’ follies: Why it may pay to take deductions early.  My latest post at IowaBiz.com, the Des Moines Business Record blog for entrepreneurs.

Nobody’s serious I:  No ‘fiscal cliff’ deal without higher rates, Geithner says (CNN via Going Concern)

Nobody’s serious, II: Grassley and King push for extension of Wind Energy Tax Credit

 

Iowa admits its capital gain forms were a mess.  A protest rejection released by the Iowa Department of Revenue highlights how badly the Iowa 1040 has been designed with respect to the Iowa deduction for capital gains on the sale of businesses an business real estate.

The taxpayer had excluded regular capital gains from a brokerage account on her tax return.  Iowa properly rejected the deduction, but admitted her mistake was understandable:

Your position relies on the Department’s instructions for completing the tax return.  We found that you are not the only one that made this mistake, so our instructions now clarify that these types of capital gains do not qualify for the deduction as shown above.  In any event, the instructions are not controlling.

Iowa now has better wording on the deduction line and a flow chart to walk taxpayers through whether they should claim the deduction.  It’s a big improvement, but it should be better.  There should be a separate form to compute the deduction, with a checklist to complete to demonstrate eligibility.

The state examines every capital gain exclusion claim.  Taxpayers should be able to submit the information the state asks for with their returns to preclude the examination; even if it would have to be paper-filed, it would save the state the time and money spent on unneeded exams.

Related:  Iowa Capital Gain Break: how it works when you rent property to your business

 

NY Times: States and Cities Shovel $80 Billion/Year in Tax Incentives to Companies, With Little Proof of Their Effectiveness  (TaxProf):

A Times investigation has examined and tallied thousands of local incentives granted nationwide and has found that states, counties and cities are giving up more than $80 billion each year to companies. The beneficiaries come from virtually every corner of the corporate world, encompassing oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains.

The cost of the awards is certainly far higher. A full accounting, The Times discovered, is not possible because the incentives are granted by thousands of government agencies and officials, and many do not know the value of all their awards. Nor do they know if the money was worth it because they rarely track how many jobs are created. Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid.

It’s a chump’s game, and we taxpayers are the unwilling chumps.  These things are to economic growth what steroids are to long-term fitness.

 

When you don’t remit withheld taxes, it might not just be a matter of getting your payments caught up.  A New Jersey couple that ran an engineering firm failed to remit over $500,000 in withheld taxes to the IRS.  They were sentenced last week to 44 months in prison after being convicted of charges arising out of the nonpayment.  From the Department of Justice Press Release:

Evidence was also introduced that the DeMuros converted withheld funds for their business and personal use, including more than $280,000 in purchases from QVC, Home Shopping Network and Jewelry Television.

No doubt it was of the best-quality.  Oh, and the couple still has to pay over $1.3 million in restitution to the IRS.

Doug Shulman is no longer IRS Commissioner, but his legacy remains:

 ABC News: Alarming Rise in IRS Refund ID Thefts, Few Prosecuted: GAO Report

Dayton Daily News,  IRS says tax fraud attempts up 39 percent

Greg Mankiw,   Some Advice on Tax Planning

Richard Morrison,   The Tax Rate Paid by the Top 1% Is Double the National Average (Tax Policy Blog)

The Critical Question:  Will the Payroll Tax Cut Fall Silently Off the Cliff? (Elaine Maag, TaxVox)

Kay Bell:  Time to spend down your medical flexible savings account (FSA)

Paul Neiffer,  Senator Baucus Urges Extension of Current Estate Tax Laws

Jim Maule,  Passing the Tax Responsibility Buck

Peter Reilly,  Who Should Be Accelerating Income Into 2012?

Patrick Temple-West,  Most Americans face lower tax burden than in 1980, and more (Tax Break)

Robert D. Flach,  DAMNED IF THEY DO AND DAMNED IF THEY DON’T.

Tragedy:  Lindsay Lohan Has Yet To Settle Tax Bills With IRS, Faces Account Seizures (TaxGrrrl)

The Tax Update is also on Twitter (@joebwan) and Facebook!

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Tax Roundup, 11/29/2012: Lemmings, cliffs and itemized deductions. And beating you until their morale improves.

Thursday, November 29th, 2012 by Joe Kristan

Maybe this is a good year to use itemized deductions after all.  Consider this story in the Des Moines Register,  Iowa GOP delegation may break anti-tax pledge:

Grassley said Republicans are willing to ignore the pledge and tap more tax money “from the same wealthy people (President Barack Obama) wants to get it from.”

Where they differ is that Obama would bump the marginal tax rate to 39.6 percent, Grassley said, while “we would suggest raising the same amount of revenue the president wants to raise by capping deductions for wealthy people.”

If Iowa Senator Grassley and the other tax increase lemmings get their way, it will be a big backdoor tax increase on owners of pass-through businesses that have their income taxed on their 1040s.  While corporations get to deduct their state income taxes on their businesses in full, individuals have to take their state income taxes on business activities “below the line” as itemized deductions.  Treasury Regulation 1.62-1T(d) explains:

To be deductible for the purposes of determining adjusted gross income, expenses must be those directly, and not those merely remotely, connected with the conduct of a trade or business. For example, taxes are deductible in arriving at adjusted gross income only if they constitute expenditures directly attributable to a trade or business or to property from which rents or royalties are derived. Thus, property taxes paid or incurred on real property used in a trade or business are deductible, but state taxes on net income are not deductible even though the taxpayer’s income is derived from the conduct of a trade or business.

This would be bad news for business owners in high-tax states or whose businesses operate in multiple states — one of their bigger business expenses would become non-deductible if itemized deductions are capped at, say, $50,000.  Somebody should mention to Senator Grassley that Iowa has a high state tax rate.

The push for deduction caps adds another wrinkle to year-end planning.  With rates going up, you would normally defer deductions to next year to get a greater benefit from them.   The cap changes that for taxpayers with high itemized deductions.  If a deduction cap is enacted, it is likely to be effective for 2013.  Better a lower-rate benefit this year than no benefit at all next year under a deduction cap.

The saddest thing about this is the whole game of “taxing the rich” is a stupid distraction.  The $80 billion or so it would raise annually is rounding error in a $1.2 trillion deficit.  Even taxing 100% of the income of “millionaires and billionaires” won’t cover the budget deficit.  The rich guy isn’t buying.

TaxProfTwo-Thirds of Millionaires Left Britain to Avoid 50% Tax Rate.  I doubt many of them headed to France.

Don’t worry, they’ll make it up in free health care.  Iowa’s part-time workers face cut in hours (Des Moines Register):

More than 50 uninsured part-time workers for the city of Cedar Falls will see their hours cut this week so the city can avoid paying for their health insurance under President Barack Obama’s signature health care law.

The move comes as a 12-month “look back” period begins under the new Patient Protection and Affordable Care Act. During the 12 months leading up to 2014, employees working more than an average of 30 hours a week must be offered health care insurance in January 2014.

Nothing is free.

Only time for a very quick roundup today.

Roberton Williams,   TPC’s New Tax Calculator Examines Fiscal Cliff Options (TaxVox)

TaxGrrrl,  Preparedness 101: What Not To Do In 2012 As Tax Rates Creep Up

Christopher Bergin,  The Other Cliff; Hint: It’s in Your Tax Return (Tax.com):

Just think of the insanity. Millions and millions of taxpayers, who every year plan on their refunds (the wisdom of which is an issue for another day) won’t get them on time. They get screwed (a technical tax term).

Paul Neiffer,  Don’t Forget Your Form 1099 Responsibilities!

Anthony Nitti,  Predicting The Future: What Will Your 2013 Tax Liability Be?

The Eagle has landed.  IRS deal means museum home for ‘Canyon,’ no tax bill for former owners (Kay Bell)

Going Concern:  Mo’ Money Taxes Founder Won’t Let Mo’ Problems Keep Him From Serving Clients

Scott Hodge,   Buffett’s Case for Minimum Tax on the Rich Fails on All Accounts  (Tax Policy Blog)

Your beatings will continue until their morale improves.   Warren Buffett: Tax Hikes on Rich Would ‘Raise Morale of the Middle Class’ (TaxProf)

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Tax Roundup, 9/25/12: Pretty pictures of ugly truths. Plus: the most unlikely undecided ever.

Tuesday, September 25th, 2012 by Joe Kristan

The Tax Foundation has put together a wonderful “chartbook” of statistics on federal taxes.  Just flipping through the slideshow would increase the average congresscritter’s tax IQ by 100 points, to about 110.  It’s all great stuff, but I have favorites.  The charts and captions are by the Tax Foundation.

Chart 28. It is often said that raising top tax rates will have little effect on business activity because only 2% of taxpayers with business income will be impacted. However, the more economically meaningful statistic is how much overall business income will be taxed at the highest rates. In 2010, the vast majority (72%) of pass-through business income was reported by taxpayers earning more than $200,000. Millionaire tax returns earned 36% of all private business income while taxpayers with incomes below $100,000 earned just 12%.

Lesson: increasing the tax on “the rich” means increasing business taxes, reducing the ability of businesses to hire and grow.

And my favorite:

Chart 29. The federal deficit has grown so large that tax increases only on America’s millionaires will not be our silver bullet. Even if the government took all of the income earned by those who have an after-tax income of $1 million or more, the amount of revenue generated would fall far short of eliminating the deficit. The expected federal deficit for 2012 is about $1.2 trillion. The latest IRS data indicates that the total after-tax income for all millionaires is roughly $709 billion. If every penny of that after-tax income were taken by the government through a 100% tax rate, and we assume that no spending cuts are made to accompany the tax increase, this would account for only about 60% of the amount needed to erase the deficit. With numbers like this, one thing is clear: soaking the wealthy with increasingly higher tax rates simply cannot be the only answer to our nation’s fiscal problems.

Lesson: the rich guy isn’t buying.  Unless spending is reduced, the inevitable tax increase will fall on everyone, because the rich simply can’t cover the bill.  Politicians who pretend that our fiscal woes will be solved by taxing “the rich” just hope you are easily fooled.

 

Lawmaker questions incentives for Iowa fertilizer plant (Quad City Times).  Joe Bolkom (D, Iowa City), chairman of the Iowa Senate Ways and Means Committee, is not pleased with the incentive package for the Orascom fertilizer plant:

“We’d like to suggest that there was no reason to waste $250 million to convince this giant international corporation to essentially do what it was going to do any way. This is probably the worst economic development deal in the state’s history,” Bolkcom said. “We should have used this money to cut commercial property taxes for every Iowa business instead of giving this multi-national corporation this $250 million that we did not need to.”

I would suggest buying the Mercedes and Land Rover for the film producer might have been worse, dollar for dollar, but it’s debatable.   Naturally the Governor, who got the deal done, disagrees:

Branstad spokesman Tim Albrecht rebutted Bolkcom’s claims, saying the state needed to provide up to $110 million in tax credits to sway the company to bring the 165 permanent jobs, along with hundreds of construction jobs and other financial benefits — such as lower-cost fertilizer — to Iowa rather than seeing the project end up in Illinois.

I’m pretty sure the fertilizer will cost the same in Illinois.

 

TaxProf Paul Caron reports that Accounting Today has issued its list of the 100 Most Influential People in Tax and Accounting.  Once again I missed the cut, while the TaxProf, Max Baucus, Chuck Grassley and Doug Shulman all made the list.  I’m sure I remain one of the 100 most influential tax bloggers in Polk County.

 

Russ Fox,  Las Vegas Attorney Accused of Tax Evasion and Structuring:

Mr. Goldberg is accused of keeping two bank accounts.  There’s nothing wrong with that. However, he’s being accused of only including the deposits from one of the two accounts on his tax returns.   Adding to his troubles is that he’s being accused of “structuring” bank deposits.  Structuring is adjusting your bank deposits of cash deliberately so as to avoid currency transaction reports (CTR).  If you make a deposit of $10,000 or more of cash, the bank will file a CTR.  Mr. Goldberg is being accused of structuring bank deposits 147 times.

Bank employees are trained to spot “structuring” and are required to report it.  If you do it 147 times, the chances of not getting spotted become vanishingly small.

 

Janet Novack,  Judge Shoots Down Another Forbes 400 Member’s Tax Shelter

William McBride,  Is it True that “Just About Everyone” Eventually Pays Income Tax? (Tax Policy Blog)

Peter Reilly,  Dependency Exemptions – Divorce Court Orders Not Binding On Tax Court

Jason Dinesen, Should a Small Tax Firm (Or Any Small Business) Pretend to Be Bigger than They Are?

Anthony Nitti,  IRS Rules That State Law Doesn’t Dictate Whether Two Properties Are Like Kind

Kay Bell,  Payroll tax cut on its last legs

William Perez,  Year-End Tax Planning for College Expenses

Shock!  Robert D. Flach is undecided!  MY DILEMMA

Critical questions for $200, Alex.  Great unintentional juxtaposition at Tax.com this morning:

That is indeed a critical question.  If “they” are Congress and the answer is “no,” be very afraid, because this is what they do sober.

 

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Tax Roundup, 8/28/12: Feds cost Wells Fargo employee his job; an energy drink falls short.

Tuesday, August 28th, 2012 by Joe Kristan

(Because of Federal rules) Wells Fargo fires Des Moines worker for laundromat incident 49 years ago.  The Des Moines Register leads today with a sad story of a guy fired by Wells Fargo who was convicted of trying to use a cardboard slug in a laundromat in 1963.  Naturally it has spurred outrage against Wells Fargo in the comment section.  But the real story begins in the fifth paragraph:

Big banks have been firing low-level employees like Eggers since the issuance of new federal banking employment guidelines in May 2011 and new mortgage employment guidelines in February.
The tougher standards are meant to weed out executives and mid-level bank employees guilty of transactional crimes, like identity fraud or mortgage fraud, but they are being applied across-the-board thanks to $1-million-a day fines for noncompliance.

So when you have enormous fines for foot-fault violations, you naturally are going to err on the side of of strictly following the rules.  If it’s a choice between a low-level employee and a $1 million-per-day fine (plus up to five years in prison for the person employing him), that’s no choice at all.  Goodbye, employee.  Thanks, FDIC.  Ironically, the rules come from Section 710 of Public Law 109-351, hilariously-named the “Financial Services Regulatory Relief Act of 2006.”  So thank you too, Congress.

 

Why we’re broke (Econbrowser):

 

The implication of a simple look at the numbers should be obvious to any objective observer.  To return to long-run fiscal solvency, the U.S. will need both tax increases, defense cuts and significant entitlement reform.

And remember, the rich guy isn’t buying.

 

IRS tax credits make tempting fraud targets  (MarketWatch):

Whenever there are refundable tax credits on the table, criminals try to tap into them. Some of them even do it right from jail.
Refundable tax credits are moneys released to taxpayers over and above any taxes they might have paid through withholding or estimated tax payments. Some common tax credits include the Earned Income Credit, the Additional Child Tax Credit, part of the American Opportunity Credit, and the 2011 Adoption Credit.

Just remember that they aren’t “IRS” tax credits.  It’s Congress that enacts them, and it’s Congress that makes the multi-billion dollar industry of stealing from you via tax credit fraud possible in the first place.

 

Jack Townsend, Seventh Circuit Compels Production of Offshore Bank Under the Required Records Doctrine:

The Seventh Circuit today decided In Re: Special February 2011-1 Grand Jury Subpoena Dated September 12, 2011, here, holding that the required records doctrine requires a taxpayer asserting a Fifth Amendment privilege to produce the documents required to be maintained under the FBAR statute.

 

 

Will Freeland,  Romney: Increasing Taxes, or Removing Tax Subsidies? (Tax Policy Blog)

Anthony Nitti, Tax Court Tackles “Dealer Versus Investor” Issue; Flood v. Commisioner, Examined

Is there an energy drink that gives you the zip you need to file a correct tax return?   Las Vegas sports drink czar sentenced for evading taxes (Las Vegas Sun)

Roger McEowen, IRS Says Vineyard Elgible To Be Expensed In Year Placed In Service

Now at TaxGrrrl: Guest Post: Online Sales Tax

William Perez,  Americans Living Abroad Filing Late Tax Returns

Robert D. Flach fondly remembers his first time.   I have no idea, myself.  Does that make me a bad person?

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Tax Roundup, 8/17/2012: Politicians, thieves — but I repeat myself

Friday, August 17th, 2012 by Joe Kristan

Compared to what?  The TaxProf covers a spat between the Tax Policy Center and the Wall Street Journal.  TPC says that Mitt Romney’s tax plan would require tax increases to the middle and lower classes.  The Wall Street Journal argues that it doesn’t have to.

When almost half of taxpayers don’t pay income tax, and the top 1 percent of taxpayers paying more federal taxes than the bottom 90 percent,  it wouldn’t be surprising if any given tax reform plan shifted some of the burden to lower incomes.   But if spending isn’t cut by a lot in the next few years, that’s going to happen anyway.  Why?  Because the “rich” simply don’t have enough income to pay the bill.

While you can defer the tax increases for awhile by borrowing, eventually that will get cut off.  Then you have to pay the bill.  Taking even 100% of the income of “the rich” doesn’t cover the annual budget deficitwithout starting to work down the $14 trillion national debt.  The only way to pay that sort of bill is to dramatically increase taxes on everybody, like they do in EuropeThe rich guy isn’t buying. So the question isn’t just whether Romney will increase taxes on the “non-rich.”  It’s also whether he will do so less than the alternative.

 

So much for the “honor among thieves” thing.  Gino Carlucci, an Arizona man, could have a tough time finding a joint venture partner.  Mr. Carlucci was sentenced to 188 months in federal prison this week for charges, including tax charges, arising out of a scheme where he defrauded and double-crossed another fraudster.  The Department of Justice press release tells this story:

According to the evidence presented at trial, Carlucci and his co-defendant, Wayne Mounts, stole large sums of money and assets from Joseph Flickinger, a tax return preparer in Ohio who had himself defrauded multiple clients of their life savings in a fraudulent investment scheme. Flickinger pleaded guilty to federal charges in a separate case and was sentenced to 70 months in prison. After defrauding Flickinger of the money, Carlucci and Mounts devised a scheme to have Flickinger arrested by federal officials, and then used the money for their own personal benefit.

I don’t suppose Mr. Carlucci remains on Mr. Flickinger’s Christmas card list.

In addition to money, Carlucci and Mounts defrauded Flickinger out of several high-end vehicles and a condo near Lake Erie, Ohio, which they quickly sold for $210,000. Carlucci had some of the funds transferred into bank accounts held in the name of his wife and father-in-law. Carlucci’s wife and Mounts withdrew more than $300,000 in cash over several months in increments of $10,000 or less so that they could avoid having the bank report their withdrawals to authorities. Carlucci and Mounts spent an additional $150,000 of the funds to buy a 43-foot luxury boat whose existence Carlucci concealed from the government for over two years.

Unfortunately the press release doesn’t tell us how Mr. Carlucci got caught.  I suspect the cash withdrawals had something to do with it.

 

Kay Bell, Romney-Ryan tax plan details to be revealed after the election.

Peter Reilly,  13% Of What Mr. Romney ?

David Brunori, Shame on Companies Who Use the Tax Laws To Stifle Competition.  When a state government develops a nicotine addiction, it goes out of its way to help its pushers.

Anthony Nitti, Wells Fargo Denied Deduction in District Court, Immediately Raises All ATM Fees to $17 to Make Up Difference*   (but follow the asterisk)

TaxGrrrl,  IRS Offers Tool to Help Students With Financial Aid.  It automatically fills out part of the FAFSA form.

Leaving Saly.  From Going Concern, “Same As Last Year” and Inept Senior Auditors Are Failures of the Audit Industry

Credentials aren’t everything.  Just ask the CPA/former IRS agent who had a bad day in Tax Court yesterday.  Russ Fox has the scoop.

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Tax Roundup, 8/14/2012: Can the rich guy pick up the tab? Plus mugshot modeling!

Tuesday, August 14th, 2012 by Joe Kristan

Extending the Bush-era tax cuts another year would save the average Iowan $1,882, according to the Tax Policy Blog.

 

The rich guy isn’t buying, no matter which way you vote.  Erick Erickson (via Instapundit):

If Barack Obama gets his way and raises taxes on everyone making $250,000.00 a year or more, the amount of money he brings in will not close his own budget deficit.  Nevermind the national debt — he won’t close this year’s budget deficit.

In fact, if we… take 100% of all annual income of everyone making $250,000.00 a year or more, we still won’t close Barack Obama’s budget deficit.

Either the spending comes down or everybody’s taxes go up.  We can look abroad to see how it works.  Finland has an extensive welfare state and most years pays for it without budget deficits.  It does so with income taxes that reach a 2012 top rate of 29.75% at €70,301, which is about $57,021 at current exchange rates.  For a US taxpayer filing single, the 28% rate doesn’t start until taxable income reaches $85,651, and not up to $142,701 on joint returns.  On top of that, Finns pay a 23% Value-added tax on most purchases — a tax that is not tied to income.  But there’s more!  There is a mandatory 4.7% payroll tax on employee gross wages, plus another 18.3% “paid” by the employer — but that necessarily reduces what they can pay the employee after-tax.

If you want that big government, everybody pays big taxes. You can’t borrow forever, and politicians who say that we can solve our budget problems just by taxing the rich some more either are dishonest or bad at math.

 

Howard Gleckman, The Ryan Budget Plan May Be the New Centerpiece of Campaign 2012:

Even more controversy will come on the spending side, where Ryan has consistently proposed deep cuts in government programs: He’d slash Medicaid by $800 billion over 10 years, shift Medicare from a guaranteed insurance program to one where seniors get a government subsidy to buy their own coverage, and chop all other spending from about 13 percent of Gross Domestic Product to about 4 percent…

In a different world, Obama would present his own serious alternative deficit reduction plan, not just attack Ryan’s. If he did so, we might have the kind of fiscal debate so many of us hope for. But in the real world, Ryan’s ideas will be red meat.

 

Jason Dinesen posts the fourth installment of a client’s identity theft tax refund nightmare:

After a ridiculous amount of re-explaining everything I had told them at least three times before, the collections department agreed to place another 60-day hold on further collection actions against Wendy.

I was told — again — to call in 60 days and “update them on what’s going on.” And again, I was told to call before the 60 days were up if we heard anything from the identity theft unit.

Of course, the 60 days came and went with nothing happening.

Service — it’s in their name!

 

She’s probably allergic to kangaroos. Ukraine’s Tymoshenko refuses to attend tax trial: daughter (Chicago Tribune).  But that could never happen in the U.S, right?

TaxGrrrl, Hit Me With Your Best Shot: Tax Pro and Former IRS Agent Pleads Guilty to Hiring Hitman

Kay Bell,  Golden State lawmakers want to exclude medal winnings from state income tax

A Stupid — At Least Unfair — IRS OVDI/OVDP Trick; Denying Overpayment Credit for Barred Years (Jack Townsend).  The IRS is always looking for new ways to torment people with foot-fault violations of their obscure and largely pointless foreign account paperwork requirements.

Janet Novack: UBS Sues Billionaire Olenicoff In Offshore Tax Cheating Case.  Nobody likes to be betrayed.

Lauryn Hill Mugshot Released From Arrest For Tax Evasion (ibtimes.com):

In the picture, her hair is short-cropped and curly, and Hill is wearing a starched-looking white button-up with black pearl-shaped accouterments on the buttons, which are fastened all the way up and cover much of her neck behind a collar.

She also wears earrings, and the photo is may in fact be one of the best ever taken of an arrested celebrity, as she looks like she had some time to touch up her makeup before the mugshot was taken.

No matter how dire the circumstances, appearance counts!  She makes a much better appearance than, say, Randy Travis.

 

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You are bleeding heavily. You eat too much.

Friday, July 13th, 2012 by Joe Kristan

Unemployment is over 8%, as it has been since early 2009.   The federal government spends a trillion dollars more than it takes in each year, and both existing and newly-enacted “entitlement” programs promise to make it much, much worse.  So what bold steps did the President promise to address looming fiscal catastrophe?

Taxing “the rich.”

As I never tire of pointing out, the rich guy isn’t picking up the tab.  However you define “rich,” they simply do not have enough money to pick up the tab.  You can’t finance mass welfare programs without a mass tax.  Europe’s welfare states impose much higher taxes on much lower incomes.  That’s what we’ll face here if spending isn’t slashed.  Hitting “the rich” isn’t meant to solve a problem; it’s meant to fool you into thinking somebody else will pay the tab the politicians are running up on you.

 Meanwhile, taxing “the rich” really means putting a heavy new tax on business.  With the popularity of “pass-through” entities like partnerships and S corporations, much of the income of “the rich” is really business income.  Taxing businesses more leaves them less money to expand, hire, and service debt.  Scott Hodge at the Tax Foundation illustrates this:

As William McBride notes, the top 20% of households aready pay 94 percent of the taxes, giving lie to the argument that the current system isn’t “fair,” whatever that means, or has been becoming less so.  A recent Congressional Budget Office report cited by the TaxProf has some eye-opening illustrations:

And:

True, none of the candidates are really being honest about our alternatives: spending a lot less, or taxing everyone a lot more.    I wish they would at least stop insulting our intelligence by pretending that we can just continue as we are if we just tax somebody else a little more, or that doing so would actually do some good.

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The rich guy can’t pick up the tab

Thursday, January 26th, 2012 by Joe Kristan

For all of the controversy surrounding the President’s depressing and lame proposals to soak the rich, the most important aspect is getting overlooked: no matter how much money you take from “millionaires and billionaires”, it will hardly reduce the budget deficit at all. The Tax Foundation explains with this helpful chart:

Click to enlarge
In so many words:

So taking half of the yearly income from every person making between one and ten million dollars would only decrease the nation’s debt by 1%. Even taking every last penny from every individual making more than $10 million per year would only reduce the nation’s deficit by 12 percent and the debt by 2 percent. There’s simply not enough wealth in the community of the rich to erase this country’s problems by waving some magic tax wand.

Even lowering the bar by taking 100% of the earnings of taxpayers over $1 million would only reduce the deficit by 35%, while of course bringing on an economic catastrophe that would make the Great Depression look like good times. By railing against “millionaires and billionaires” the President tries to distract us from the sad reality: failing to address the government’s incontinent spending will eventually require a big tax increase on everybody. The rich guy isn’t buying because he simply can’t.
Other coverage of the President’s tax proposals:
Shikha Dalmia, Obama’s Daft Plan to Insource Jobs Back to America
Howard Gleckman, President Obama

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