Posts Tagged ‘Tony Nitti’

Tax Roundup, April 29, 2013: Getting ready for the Obamacare Investment Income Tax. And a disturbing lack of faith in OVDI.

Monday, April 29th, 2013 by Joe Kristan

20121120-2Laura Saunders, Are You Ready for the New Investment Tax?, (Wall Street Journal, via The TaxProf):

The tax, which took effect Jan. 1, applies to the “net investment income” of married joint filers who have more than $250,000 of income (or $200,000 for singles). Only investment income—such as dividends, interest and capital gains—above the thresholds is taxed. The rate is a flat 3.8% in addition to other taxes owed.

“Affluent investors who ignore this tax will be in for a total shock next April 15,” says David Lifson, a certified public accountant specializing in tax at Crowe Horwath in New York. Such income is typically not subject to withholding, and people won’t be factoring it into their estimated taxes. Lower-bracket taxpayers who receive a windfall large enough to owe the tax will also be in for a surprise.

This tax is shockingly complex, and it will surprise a lot of taxpayers next April.

Related: Tony Nitti,  Overview Of The New 3.8% Investment Income Tax, Part 1


Feds sue over Des Moines utility tax (Des Moines Register).  Des Moines lost a long legal battle over its “utility tax” on electric bills.  Now the federal government is after the city:

Federal prosecutors acting on behalf of the U.S. Department of Veteran Affairs sued the city of Des Moines and Mid­American Energy Co. on Friday, alleging that the city’s longstanding surcharge on gas and electric customers in Des Moines constitutes an illegal tax when levied against Uncle Sam.


Trish McIntire,  W-2Gs and CP2000s:

When a taxpayer wins a jackpot, the casino gives them the W-2G for the win at that time. It’s up to the taxpayer to keep the W-2G safe and bring it into me, or their preparer, when their taxes are done. What happens to the W-2G? It gets shoved into a purse or pocket, thrown in the glove compartment or on the desk at home or thrown in the trash by accident.


I support keeping the deduction for acquisition debt mortgage interest on one’s primary personal residence, and the deduction for real estate taxes on the same primary personal residence, not to encourage home ownership, but as a form of “geographical equalization”.

In other words, he wants to help out people who live in places where houses cost more.  I think that’s misguided, as it also encourages people who live in low-cost locales like Des Moines to build palaces with help from the taxman.


Russ Fox,  1700 Miles and a 7% Difference.  Joe Mauer of the Minnesota Twins tries to avoid Minnesota residency for low-tax Florida.  It went about as well as this season will for the Florida Marlins (or the Twins, for that matter).


Kay Bell,  Smokers are among the latest federal tax targets.  Transferring nicotine addiction from smokers to government.

Jana Luttenegger,  IRS Announces Furlough Days (Davis Brown Tax Law Blog).

Patrick Temple-West,  Obama talks budget with Republicans, and more (Tax Break)

Paul Neiffer,  Don’t Forget Your Retirement Plan.  “I was talking with a new farm client the other day about his estate plan and what struck me the most was not how much farm land value he had accumulated but rather the amount he had tucked away into his retirement plans.”

Peter Reilly,  Fifth Avenue Inspirational Shopping Not Doing Business. Dang.


Phil Hodgen,  Note to Concerned Immigrant:

Get some competent advice about how to handle the past years. If the advice is OVDI, then stand up and walk away, swearing the mightiest oaths that a drunken sailor could swear.

Perhaps the Offshore Voluntary Disclosure Initiative has somehow failed to gain the confidence of the tax bar?

Jack Townsend,  More on the GAO Report on IRS Offshore Disclosure Initiatives


Trust me, peasant, it’s for your own good.  Former GM Exec Bob Lutz Suggests Higher Gas Taxes Would Help Americans (TaxGrrrl)

The soft bigotry of low expectations.  The Pioneer Press Has Crowned Its Sexiest Accountant(s)  (Going Concern)

 Now he tells us.  Jailed tax cheat’s warning: Just ‘don’t do it’ (




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.


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 (

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.”



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 (, via The Beanwalker)

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



Tax Roundup, 4/9/2013: We assume it is so, and that makes it so.

Tuesday, April 9th, 2013 by Joe Kristan

Radio Iowa runs with this headline “$8.7 million from “Development Fund” creates 600+ jobs.”  This headline arises out a “study” paid for by the economic development bureaucracy (meaning: taxpayers) to demonstrate the tremendous job-creating skills of people who give your money to other people.  How did this study demonstrate this job creation?

By assuming it.

From the “study”:

A survey of past recipients of Demonstration Fund investments was conducted by the Iowa Innovation Corporation to determine, among other things, how large these companies are now as compared to their pre-investment levels. This growth in size – in annual revenues and in head count – can be attributed in part to the involvement of and investment by the Demonstration Fund.

Furthermore, the resulting economic impact is greater than the direct increase in expenditures and head count, since those increases lead to a series of spillover effects, whereby the impact of new company spending and employee earnings ripples through local economies and supports additional economic activity and job creation. Job impact estimates are determined by using standard input-output methodologies and multipliers, as provided by the US Department of Commerce.

In other words, they assumed:

– that multipliers work – a shaky assumption.

– that the businesses and jobs wouldn’t happen without the wonderful effects of your money being directed by politicians to those businesses.

– that the money wouldn’t have also generated jobs if it had been spent elsewhere.

That’s the same kind of thinking behind the 2009 stimulus spending spree.  The results were less than assumed.  The dark line is what government projected that spending would do to unemployment, using “standard multipliers.”  The lighter blue line was the grim fate awaiting us absent a government binge.  The red dots are the actual post-binge unemployment rates.


The study does not have the two words that could have given it credibility:opportunity cost.”  They assume that the money left in the hands of taxpayers would have done nothing.  But it would have been spent elsewhere, undirected by politicians; it would have bought things, creating profits and jobs.  But as they would have gone unclaimed by economic development officials, no press conference could have been called, so they don’t count.


Jeremy Scott, What Should Be in the Obama Budget (

Obama consistently ignores the statutory timeline for releasing his budget, and this year is the latest he has ever put forward a fiscal proposal.  On all things administrative, the president is frequently dilatory.  But those waiting with bated breath for Obama’s proposals will be disappointed — the budget will be more of the same and has little chance of actually being passed or even taken up by Congress.

Good news.

Does President Obama Want To Tax Your Retirement?  His budget proposes a cap on the size of retirement accounts, but see the item above.


TaxProf,  WSJ: Taxing Lunch at Google and Facebook?.  Will the IRS start putting free meals for techies on their W-2s?  Just don’t tax my busy season office donuts.

Tax Trials, New York’s Highest Court Affirms Constitutionality of Click-Through Nexus

Nostalgia.  Today in History: Income Tax Ruled Unconstitutional in Pollock v. Farmers Loan Trust Co. (Joseph Henchman, Tax Policy Blog)

William Gale, Tax Policy Should Consider New Business, Not Small Business (TaxVox)

Martin Sullivan, How Should the U.S. Stop Profit Shifting? (


Trish McIntire, One Week Warning

Kay Bell,  Taxes are due in a week! Don’t panic. Use 7-day filing plan

William Perez,  What to Do if You Owe Taxes for 2012

Russ Fox, Bozo Tax Tip #4: Procrastinate!


Jim Maule,  How Not to Litigate a Tax Case

Peter Reilly, Wesley Snipes Raises Creationist Hopes For Kent Hovind

Definitely not a problem for me this year:  Bragging About Winning Your NCAA Pool On Facebook May Cost You Come Tax Time (Tony Nitti)


News you can use: The Definitive ‘I’m Quitting Public Accounting’ Checklist (Going Concern)



Tax Roundup, 2/18/2013: Your tax dollars at work for somebody else.

Monday, February 18th, 2013 by Joe Kristan

 Why don’t some big companies complain about Iowa’s highest-in-the-nation corporation tax rate?  Because they are on the receiving end.

20130218-1The Department of Revenue last week issued the 2012 list of recipients of of the Iowa Research Activities Tax Credit over $500,000.  Like the Earned Income Tax Credit for the working poor, the Research credit is “refundable.”  If a recipient doesn’t actually owe tax, the state will send a check for the amount of the credit anyway.

For the working poor, the EITC is unabashedly a welfare program.  For the corporate recipients, the credit is touted as “economic development.”  I’m sure EITC recipients feel the same way about their government checks.

The report shows that about $34.2 million of the $50.5 million claimed in research credits was refunded — about 2/3.  The biggest recipient of the credit was Rockwell Collins, which received $13.8 million in credits.    The report doesn’t say how much credit was refunded for each large recipient; If 2/3 of the Rockwell Collins credits were refunded, that means Iowa taxpayers gave the company $9.2 million

I don’t believe Rockwell Collins, or anyone else, should pay Iowa corporation income tax.  It is a bad tax whose repeal would make life better for Iowans.  But that’s a long way from saying that taxpayers should actually cut annual welfare checks to corporations doing business in Iowa.   While I don’t blame them for taking the checks — who turns down free money? — don’t try to tell me that it’s good for me.

Repeal of giveaways like the refundable research credit and the “economic development” credits given to the big fertilizer companies would go a long way towards paying for repeal of the corporation income tax for businesses lacking the lobbyists and wire-pullers needed to hit the corporate welfare jackpot.  Maybe some day we’ll demand the legislature replace the tax-some, pay-others Iowa tax system with something better, like The Quick and Dirty Iowa Tax Reform Plan.

Speaking of Iowa Tax Reform, I have posted my analysis of the proposed Iowa 4.5% optional flat tax.


Dislike.  The left-wing high-tax advocacy group Citizens for Tax Justice is scandalized that Facebook isn’t paying income taxes on its 2012 income (via the TaxProf):

Earlier this month, the Facebook Inc. released its first “10-K” annual financial report since going public last year. Hidden in the report’s footnotes is an amazing admission: despite $1.1 billion in U.S. profits in 2012, Facebook did not pay even a dime in federal and state income taxes.

Instead, Facebook says it will receive net tax refunds totaling $429 million. Facebook’s income tax refunds stem from the company’s use of a single tax break, the tax deductibility of executive stock options. That tax break reduced Facebook’s federal and state income taxes by $1,033 million in 2012, including refunds of earlier years’ taxes of $451 million.

So why are “executive stock options” deductible?  Because they are taxable to the recipients as W-2 income.  They are reported as taxable income on the executives 1040s at the same 35% top rate that the corporation pays.  In other words, CTJ is upset because the executives, rather than the corporation, write the checks to the IRS.

There is no actual tax reduction.  In fact, the government actually gets more income from the options than if Facebook had not issued the options and just paid 35% tax. Because they are also subject to the 2.9% medicare tax (3.8% starting in 2013), the option exercises actually generate additional revenue for the IRS.  Presumably CTJ would want the executives to pay tax with no deduction on the other side.  That seems unjust.


Another victory for Citizens for Tax Justice!  After Illinois Tax Increase, State Farm Reportedly Moving Operations to Texas (Joseph Henchman, Tax Policy Blog).


Peter Reilly, Married Same Sex Couples – Windsor Decision Requires Action This Tax Season

Kay Bell,  Sign up now to pay your federal tax bill via EFTPS.  With the ongoing disintegration of the postal service, it’s good to have a secure and sure way to get your taxes paid on time.  I’m signed up.

Tony Nitti,  Former San Diego Mayor Gambles Away $1 Billion; What Are The Tax Implications?

Martin Sullivan, Taxation of Intangibles: Still Hazy After All These Years (

Roberton Williams, A New Marriage Penalty for High Earning Couples—and a Bonus for Some (TaxVox):

Our new Marriage Bonus and Penalty calculator, despite all its  Valentine’s Day finery, ignores the new 0.9 percent Medicare payroll tax hike buried in the 2010 health law. The extra levy affects only a few high-income couples but in very different ways. Lucky couples will collect marriage bonuses of up to $450. But those less fortunate—if anyone making $250,000 can be considered less fortunate—will incur marriage penalties of as much as $1,350 in additional Medicare tax.

Just another example of the whimsical and poorly-conceived nature of the Obamacare Net Investment Income tax.


Brian Mahany, IRS Wins Tax Shelter Case – Will Claims Of Accounting Malpractice Follow?

Jack Townsend,  New Plea Agreement Involving Israeli Banks

Robert Goulder, Jack Lew, the Cayman Islands & FATCA (

Ben Harris, Five reasons Why the Sequester’s Automatic Spending Cuts are Bad Policy (TaxVox).

Yeah, that’ll work.  Newtown Lawmaker Proposes ‘Sin Tax’ On Violent Video Games (TaxGrrrl).


Traverse City!  I will be speaking at a Farm Income Tax, Estate and Business Planning Seminar in Traverse City, Michigan June 13-14.  The seminar is co-sponsored by the Iowa State University Center for Agricultural Law and Taxation.  Other speakers include Roger McEowen and Paul NeifferRegister now!


Chicago! Jackson’s Fall Includes Tax Charge (Russ Fox):

The last three governors of Illinois all went to prison (and it’s equal opportunity corruption: both Republicans and Democrats).  Joining them will be former Congressman Jesse Jackson, Jr. and his wife, Sandi (a former Alderman in Chicago).

Mr. Jackson resigned last November from Congress; Ms. Jackson resigned in January from the Chicago City Council.  Both are pleading guilty: Mr. Jackson to conspiracy and Ms. Jackson to filing a false tax return.  They pleaded guilty on Friday.

The scheme apparently had them using “business” credit cards (here, business is their re-election campaign) for personal expenses.  As this blog has highlighted numerous times in the past (and will likely do numerous times in the future), you can’t put personal expenses on a business return.  And we’re not talking nickel and dime purchases; the total is $582,772.58.  Add in filing false campaign reports and you have problems.

When people complain about the need to turn power over to government instead of “greedy corporations,” there is an implied assertion that the government and its operatives are somehow less vulnerable to avarice and self-dealing.  Against all evidence.