Posts Tagged ‘William McBride’
Thursday, June 6th, 2013 by Joe Kristan
Just in case you’re having a bad day… They hit Omaha Beach 69 years ago today.
I don’t know about you, but I’m pretty sure nothing I face today will be hard compared to that.
TaxProf, The IRS Scandal, Day 28.
Washington Post, Two IRS officials put on administrative leave for accepting gifts at Calif. conference. One is the “director of implementation and oversight” for Obamacare implementation, so maybe he can say it was just an oversight. But Going Concern notes ”It was $1,100 in free food. Just freaking sayin.”
Robert W. Wood, Lavish Expenses Are A No-No, Unless You’re The IRS
Kay Bell asks “Can the IRS be saved?” It would be a lot easier if it functioned only as a revenue collection agency. Now it is a superagency in charge of health care, industrial policy, historic preservation, welfare… as if just figuring taxable income weren’t enough of a challenge.
So what about the things IRS is supposed to be doing? Jason Dinesen gives us a hint in Taxpayer Identity Theft — Part 15:
I’ve been telling the story of Wendy Boka and the identity theft nightmare she’s going through with the IRS. Her husband Brian died at age 31 in 2010. Someone stole his identity and filed a fraudulent tax return in his name.
The IRS still has not processed Brian and Wendy’s final joint tax return for 2010. Wendy is owed a refund from that tax return and we’re still waiting for that refund to be paid.
Good thing they have that line-dancing thing down.
Janet Novack, Don’t Let Fear Of Taxes Or IRS Audits Destroy Your Wealth. TaxGrrrl is quoted:
“Don’t let the tax tail wag the dog.” In other words, you should think about taxes when you invest, but “don’t be so paralyzed by the tax consequences that you miss out.” That goes for selling, too–don’t keep holding an asset you should get rid of just because you hate paying capital gains tax.
Wise.
Ben Harris, What Changes in the Mortgage Deduction Would Mean for Home Prices (TaxVox):
By contrast, completely eliminating the mortgage interest and property tax deduction—a drastic change that probably would only happen if accompanied by a new tax preference for housing—would cause housing prices to fall by an average of 11.8 percent in the 23 cities studied. Estimated price declines would range from 10.3 percent in Seattle to 13.8 percent in Milwaukee.
That seems high to me.
Cara Griffith, States’ Misuse of Unclaimed Property Laws (Tax Analysts Blog): “Unclaimed property laws were never meant to be a major revenue raiser for states or a major headache for businesses.” Unfortunately, politicians think that everything defaults to them.
Brian Strahle, State and Local Tax Challenges with Leases of Equipment and Other Assets – GUIDE / WEBINAR
Peter Reilly, Conservation Easement No Deduction For Hypothetical Vineyard
In other news, bears poop in the woods. Social Security Still Deep in the Red (Kyle Pomerleau, Tax Policy Blog).
William McBride, Contra Every Major Study, EPI Claims Corporate Tax Does Not Affect Growth (Tax Policy Blog)
Tax Justice Blog, CTJ Report: Apple Is Not Alone. Amazing that other companies also want to use legal means to reduce their taxes.
Patrick Temple-West, Calculating Apple’s true U.S. tax rate, and more
TaxGrrrl, As Senate Debates Immigration Reform, Worries Grow Over Tax Amnesty Provisions
Christmas in June? They’re trying to restore the Christmas Tree Tax (Roger McEowen).
Tags: Ben Harris, Cara Griffith, Going Concern, Janet Novack, Kyle Pomerleau, Patrick Temple-West, Peter Reilly, Robert W. Wood, Roger McEowen, Tax Justice Blog, TaxProf, William McBride
Posted in Tax Roundup | No Comments »
Thursday, May 30th, 2013 by Joe Kristan
David Brunori, Worst Tax Idea of the Year? Cuomo Wins by a Landslide:
An ideal tax system is based on a broad base and low rates. At least that is what the thinking folks believe. An ideal tax system also treats similarly situated people and organizations the same. People concerned about fairness have always thought that. And an ideal tax system minimizes economic distortions. Now politicians of every stripe violate that ideal every day. Personally, I think politicians violate this idea because 1) they arrogantly want to dictate their views on the rest of us, or 2) they want to enrich their friends.
Now the Governor of New York wants to create tax-free zones:
Not everything, everyone, or everywhere in New York will be tax-free. The tax-free communities will be all of the state universities (and curiously a number of private universities) outside New York City. Companies that open shop in these communities will be exempt from sales, income, and property taxes. That’s better than living in New Hampshire. Better still, employees who work for businesses in the new tax free communities will be exempt from paying state income taxes.
So if you are in the community you don’t pay tax. If you are outside, even by six inches, you do.
I agree that this is a terrible idea, as is. But if Governor Coumo is willing to go further and create libertarian free cities in his state, that would be pretty cool. Galt’s Gulch, NY could give the Free State Project in neighboring New Hampshire a run for its money.
William McBride, CBO: Tax Expenditures in the Eye of the Beholder. With this handy chart:
TaxProf, The IRS Scandal, Day 21
Russ Fox, The Big Questions Remain Unanswered (IRS Scandal Update):
Why did the IRS scrutinize “conservative” and “tea party” applications? It’s clear the orders came from Washington. Who ordered it? The IRS employees in Cincinnati were most likely just following the orders from Washington. Someone came up with the idea to have this scrutiny.
It clearly wasn’t just some rogue Ohioans.
NBC News, IRS higher-ups requested info on conservative groups, letters show
Ed Driscoll, The Ohio Players. A reminder that the IRS scandal includes the illegal disclosure of confidential applications for exempt status by right-side organizations to a left-side 501(c)(3).
Linda Beale, The real IRS scandal. To her, the real scandal is that anybody is paying attention.
Patrick Temple-West, IRS gets a new risk officer, and more (Tax Break)
Peter Reilly raises an interesting argument In Defense of Special Tax Breaks:
Clearly there is value in keeping that Greek Revival facade, but there is no way that the owner of the property can reap that value. If there is a CVS there, I will go in and buy a bottle of Mountain Dew or get a prescription filled which will help pay the rent that the highest and best use yields the property owner. Having me look at the facade and imagine the men and women who thought that there was an ancient precedent for the new form of government that they were devising is tough to charge for.
That is why there needs to be some sort of public support for the preservation of historic structures.
I disagree. As much as I like cool old buildings, giving them special tax treatment means other people subsidize my aesthetic preferences. What makes that OK, but wrong to make me subsidize a velvet Elvis? The tax law has enough to do to fund the government; making it the Swiss Army Knife of public policy makes it not very good at anything.
Robert D. Flach, DON’T BLAME APPLE!
The fault lies not with APPLE or the members of the 47% or the “wealthy”. The fault lies with the idiots in Congress who write the tax law.
Precisely.
TaxGrrrl, Copyright Troll Lawyer Pleads Poverty, Asks To Be Let Off The Hook
Tax Justice Blog, State News Quick Hits: Nicolas Cage Lobbies, Massachusetts Raises Revenues and More
It’s unconstitutional, except for the part where I cash in. An case of cognitive dissonance from California via the Central Valley Business Times:
Randy Barker, 59, of Chico, is off to three years and 10 months in federal prison where he can mull over the 16th Amendment to the Constitution, the amendment that established the federal income tax.
He’s associated with the so-called “Tax Challenger” community, a group that believes that the tax laws are unconstitutional or otherwise invalid.
According to testimony presented at trial, Mr. Barker filed an income tax return in February 2009 that falsely claimed more than $1.4 million in interest income and falsely claimed that the same amount had been withheld in tax.
So paying tax returns is unconstitutional, but it’s just fine to file returns claiming that the government is sitting on a bunch of your money? I need to re-read my constitution.
The most interesting part to me:
This combination allowed Mr. Barker to claim a refund of $987,900 in allegedly overpaid income tax.
Evidence showed that, after receiving the refund, Mr. Barker and his wife spent most of the money within weeks by making extensive cash withdrawals and by purchasing a $495,000 house, more than $90,000 in home furnishings, and a truck.
So this guy managed to steal almost $1 million with a laughably stupid tax return. Sure, he got caught, but that money is gone forever. I suppose the IRS is just too busy examining prayers to stop cash from flying out the back door.
Tags: David Brunori, Ed Driscoll, Galt's Gulch, Linda Beale, Robert D Flach, Russ Fox, tax crime, Tax Justice Blog, tax protesters, TaxGrrrl, TaxProf, William McBride
Posted in Tax Roundup | No Comments »
Thursday, April 11th, 2013 by Joe Kristan
Iowa Senate Republicans advance income tax plan. TheGazette.com reports:
Sen. Randy Feenstra, R-Hull, said all 24 minority Senate Republicans have signed onto a proposal to significantly lower state personal income tax rates and simplify the Iowa tax code by offering a two-pronged approach that would eliminate federal deductibility and benefit most Iowans.
…
The Hull Republican said the proposed new tax structure would flatten the current nine income tax brackets into three, elimination of federal deductibility as a competitive impediment, enhance the current standard deduction for all taxpayers and provide an extra boost for blind, elderly and dependent Iowans, eliminate itemized deduction, increase personal exemption credits, and raise filing thresholds.
So far I have been unable to find the bill (though it being April 11, I’m not going to spend a lot of time looking for it today). As Senate Republicans have no chance of advancing a bill in the face of majority Democratic opposition, it’s really a gesture. Still, it’s nice to see that income tax reform remains alive, in spite of the Governor’s indifference this year. It’s also nice to see that the insistence on keeping the deduction for federal taxes is eroding. Much better to build it into a lower rate.
If they keep talking taxes, they may finally see that The Quick and Dirty Iowa Tax Reform Plan is the way to go!
Radio Iowa has more.
Megan McArdle, “Tax Breaks for Corporate Jets”: The Non-Issue at the Heart of the Presidential Agenda:
This is a bit weird given that President Obama rides on what is essentially the nicest corporate jet in the world. To be fair, the President is quite right that companies do not need a tax break to buy corporate jets. But since they don’t really get a tax break for buying corporate jets, we probably don’t need to spend this much valuable presidential time worrying about this non-problem.
Anything to make life difficult for a high-tech U.S. manufacturer. As long as the President continues to beat dead horses like this and the “Buffett Rule,” we know he is not at all serious.
Tony Nitti, Tax Aspects Of The President’s FY 2014 Budget
Howard Gleckman, The Real 2014 Budget Battle May Be Over Spending, Not Taxes
William McBride, President Obama’s 2014 Budget Takes another Whack at Savers (Tax Policy Blog)
Paul Neiffer, Here We Go Again!
Cara Griffith, Crafting a Better Mainstreet Fairness Act? (Tax.com)
By enacting it? How Democrats Will Destroy Progressive Government (Joseph Thorndike, Tax.com):
Sure, Democrats pay lip-service to infrastructure, education, and the like. But for the most part, they are profoundly unwilling to make a wholistic case for activist, progressive government.
Actually, they probably wouldn’t get very far making the case honestly.
TaxProf, Is the IRS Stalking You on Facebook, Twitter? Is that how they caught “The Queen of IRS Tax Fraud?”
Jason Dinesen, Same-Sex Marriage, Divorce and Taxes
Me: How much K-1 loss can I deduct? Start with your basis. Part of my 2013 filing season tips series. My exciting installment on partnership debt basis goes up later this morning.
Oh, but it’s for our own good. IRS Claims It Can Read People’s E-Mails Without Needing a Warrant (Joseph Henchman, Tax Policy Blog).
Jack Townsend, KPMG Publication on FBAR Filing Requirements for Corporations and Executives
Russ Fox, Bozo Tax Tip #2: Nevada Corporations
Kay Bell, Top 10 things you don’t want to hear from your accountant. How about “I’m calling from Brazil, thanks for the cash!”
He’d have had trouble during tax season. FYI: The Guy Who Stabbed 14 People At a Texas College Wanted To Be an Accountant When He Grew Up (Going Concern)
Christopher Bergin, Why Transparency Is Like Porn (Tax.com) No, it’s not about Lululemon.
News you can use. Make Your Own Bubble in 10 Easy Steps (Bryan Caplan)
Tags: Anthony Nitti, Branstad tax policy, Bryan Caplan, Cara Griffith, Christopher Bergin, Going Concern, Howard Gleckman, iowa tax policy, Jack Townsend, Jason Dinesen, Joseph Henchman, Joseph Thorndike, Kay Bell, megan mcardle, Obama Tax Policy, Paul Neiffer, Quick and Dirty Iowa Tax Reform Plan, Russ Fox, tax crime, TaxProf, William McBride
Posted in Uncategorized | No Comments »
Monday, April 8th, 2013 by Joe Kristan
Wikipedia image
Greg Mankiw, The President’s Latest Bad Idea:
Apparently, President Obama’s budget is going to include some kind of penalty for people who have accumulated more than $3 million in retirement accounts. The details are not yet known, but I think we know enough to say that this is a terrible idea.
A sizable body of work in public finance suggests that consumption taxes are preferable to income taxes. Completely replacing our tax system with a better one is, however, hard. Retirement accounts, such as IRAs and 401k plans, are one way our tax code has gradually evolved from an income tax toward a consumption tax. The use of these accounts should be encouraged, not discouraged.
Unlike some of his other bad ideas, this one isn’t going anywhere.
William McBride, President Obama’s New Tax Increases (Tax Policy Blog)
TaxProf, NY Times: Former Baucus Staffers Cash in as Finance Committee Tees Up Tax Reform. Ah, the sacrifices of public service. I bet they aren’t proposing the Instapundit revolving door tax. Related: Max Baucus and Dave Camp, Tax Reform Is Very Much Alive and Doable. (Wall Street Journal).
Paul Neiffer. 3%-6%-12%:
One of our last posts indicated that the IRS had issued a notice indicating they might not assess the late payment penalty for returns that are extended and paid after April 15, 2013 if the return included certain forms that were delayed by the new tax law.
However, when you read the fine print, it appears that you still need to accurately estimate your tax and pay in at least 90% of this extra tax to escape the penalty.
The IRS language is:
For each taxpayer who requests or has requested an extension to file a 2012 income tax return that includes one of the forms listed in Exhibit 1 of this Notice, the IRS will deem the taxpayer to have demonstrated reasonable cause and lack of willful neglect, provided a good faith effort was made to properly estimate the tax liability on the extension application, the estimated amount is paid by the original due date of the return, and any tax owed on the return is fully paid no later than the extended due date of the return.
I suspect that the IRS will not be very strict in making taxpayers demonstrate reasonable cause, but if you have the cash, you should pay up.
William Perez, Filing Protective Claims for 2009 Tax Returns for Same-Sex Married Couples
Kay Bell, 6 ways to prepare and e-file your federal taxes for free
TaxGrrrl, Ask The Taxgirl: Home Offices And Capital Improvements
Roberton Williams, How Much Will 2013’s Payroll Tax Hikes Cut Your Take-Home Pay?
Peter Reilly, Wesley Snipes Almost Out – Kent Hovind Remains In Prison
Russ Fox, Bozo Tax Tip #5: Don’t Seal the Envelope!
One of her clients mailed his tax return to the IRS but forgot to seal the envelope. The return did make it to the IRS, but without page two of Schedule C. The first that the client found out there was a problem was when the IRS sent him a letter noting the omission. The second time he knew that there was a problem was when she found she was a victim of identity theft.
E-filed returns never fall out of the envelope.
Jack Townsend, Good Overview Article on Financial Issues for Americans Living Abroad
Phil Hodgen, Form 1040NR Filing, Tax Payment Deadlines
The criminal masterminds that the IRS can’t stop. Tampa exotic dancer sentenced for tax fraud (tbo.com)
The Critical Question. News Analysis: Why Are Fee Waivers Like Deep-Fried Twinkies? (Lee Sheppard, Tax Analysts; gated).
Stay tuned for my first 2013 filing season tip going up later this morning!
Tags: greg mankiw, identity theft, Jack Townsend, Kay Bell, Lee Sheppard, Paul Neiffer, Peter Reilly, Phil Hodgen, Roberton Williams, Russ Fox, TaxGrrrl, TaxProf, William McBride, William Perez
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Friday, April 5th, 2013 by Joe Kristan
So a Blonde and a lawyer walk into Tax Court. She loses.
No, the Tax Court has not started to report petitioner hair color in its decisions, along with the names of the attorneys and the resident state (“petitioner resided in Iowa and was brunette during the tax years at issue but gray at trial”). This taxpayer’s first name is actually Blonde. And she was an attorney, at least until 2006, when she pleaded guilty to failure to file tax returns. From the Tax Court:
Since the only issue currently before the Court is whether Blonde Grayson Hall signed the Form 4549 under duress we will refer to Blonde Grayson Hall as petitioner.
Petitioner attended the University of Michigan Law School and was admitted to practice law in 1982. Petitioner was the chief executive officer of Hall & Associates, LLC, a law firm in Philadelphia, Pennsylvania, from 1995 to 2006.
As part of her plea deal, the taxpayer filed Form 4549 agreeing to assessment of additional tax liabilities for several tax years. She apparently had second thoughts:
Thus, the issue before us is whether Blonde Grayson Hall should be relieved of her agreement in the Form 4549 because it was signed under duress.
Of course, duress is what a plea deal is all about. You accept a bitter pill because you think it could get a lot worse if you go to trial. While this is a fearsome and sometimes abused weapon in the hands of prosecutors, the Tax Court said it wasn’t the kind of duress that makes the Form 4549 go away (my emphasis):
The requirement that petitioner sign the Form 4549 stems from the Government’s efforts to prosecute her for admittedly criminal conduct and to collect taxes and penalties. No doubt, given the circumstances, these efforts were zealous and disadvantageous to petitioner. However, every criminal defendant who is offered a plea agreement faces an equally unpalatable decision — accept a legally authorized plea agreement that will include terms disadvantageous to the criminal defendant or go to trial which may result in significantly worse consequences for the criminal defendant. This unpalatable decision does not constitute duress or involuntariness.
The taxpayer is stuck with the Form 4549 that she signed.
The moral: If you plead guilty to criminal tax charges, it is very hard to fight the assessment for the years covered by the plea. Even if you are a lawyer, and even if you are Blonde.
Cite: Hall, T.C. Memo 2013-93.
Iowa’s loss, Government accounting’s gain. Iowa’s longtime State Auditor David Vaudt is leaving office to head the Government Accounting Standards Board. He’s fought the good fight for honest reporting of state finance. It will be hard to find a replacement as good.
His term in office has covered governors of both parties, all of whom found him more or less annoying with his objections to budgetary games. His office did excellent work in the film credit scandal, issuing a comprehensive report showing that 80% of the credits were improperly granted. Best of luck to him in his new job.
William McBride, Standard Economics Says Capital Income Taxes Should Be Zero (Tax Policy Blog). He quotes Garett Jones:
Under standard, pretty flexible assumptions, it’s impossible to tax capitalists, give the money to workers, and raise the total long-run income of workers.
Not, hard, not inefficient, not socially wasteful, not immoral: Impossible.
Yet the effort to do so never ends. Nor the harm it causes.
Christopher Bergin, ‘Commissioner-Less’ (Tax.com):
The Internal Revenue Service is currently without a Commissioner. Douglas Shulman, the 47th IRS Commissioner stepped down last November.And from what I’m starting to hear, the IRS may not have a new Commissioner for as long as close to two years. That is not a good thing.
Still an improvement over the last one.
Eric Todor, Moving to a Territorial Tax May Not Be the Windfall Multinationals Expect (TaxVox)
David Cay Johnston, Unkind to Charity (Tax.com) “The tax rules on charities, both the many good and the few bad, are about to get much more anti-giving.”
Jack Townsend, District Court Denies Bankruptcy Discharge for BLIPS Shelter Investor
Kay Bell, William Shakespeare, tax cheat
William Perez, GoodApril Online Tax Planning Application
Perverse incentives. Whoa, Cowboy: Tax Laws May Make Romo Highest Paid NFL Player (TaxGrrrl)
News you can use: You Are a Terrible Investor and You Should Stop That (Megan McArdle). Actually, it’s excellent advice that I try to follow.
Russ Fox, Bozo Tax Tip #6: Just Don’t File. It sure didn’t work for the Blonde.
Jim Maule, How to Protest a Tax:
According to this report, dozens of people supporting a bill to repeal a state sales tax on amounts charged by dance establishments decided to dance in protest. According to the report, the protestors demonstrated the salsa, the flamenco, the tango, and even a conga line. Considering the speed with which legislatures get things done, perhaps they engaged in some slow dancing, though the report does not mention it.
First they came after the big bands, but because I was a conga dancer, I did nothing.
Tags: Christopher Bergin, David Cay Johnston, David Vaudt, Eric Todor, Garrett Jones, Jack Townsend, Judge Ruwe, Kay Bell, maule, megan mcardle, Russ Fox, tax crime, TaxGrrrl, William McBride, William Perez
Posted in Tax Roundup | No Comments »
Friday, March 22nd, 2013 by Joe Kristan
IRS waives late payment penalties for returns containing delayed forms. If you can’t file or pay taxes on time, it’s always better to extend your return while you round up the information or the cash. The penalty for filing a late unextended return is 5%, plus an additional 5% for every additional month of late filing. The penalty for paying late on a timely extended return, in contrast, is only 1/2%, plus 1/2% per additional month.
While penalties will be waived, the IRS will charge interest on amounts paid after the deadline.
The notice has a complete list of forms that allow taxpayers to qualify for the late payment exception. The most commonly-seen ones are probably Form 4562, for depreciable assets and the section 179 deduction, and Form 8582 for passive activities.
By issuing this notice early, the IRS has also given taxpayers a planning opportunity. If you have a big balance due on April 15, and you have one of the qualifying forms, you now are eligible for what amounts to a low-interest loan for up to six months, until the October 15 extension deadline. Many taxpayers accelerated income into 2012 to beat the 2013 tax hikes, and they loan might come in handy. The current IRS interest rates:
- three (3) percent for underpayments;
- five (5) percent for large corporate underpayments
But if you have the cash, you probably want to pay up on April 15. There aren’t many places left where you can get a 3% after-tax return on your money for six months.
In a just world, they could sue Congress and the IRS. TurboTax, other Intuit products, now OK to use in Minnesota; H&R Block facing lawsuits over filing snafu, refund delays (Kay Bell)
The tax law is still broken, though. Minnesota Revenue Department Announces TurboTax Problems Have Been Fixed (William Perez)
William McBride, UK Dropping Corporate Rate to 20 Percent, Half the US Rate (Tax Policy Blog). It makes a difference.
Peter Reilly, International Flight Attendant Does Not Score As Well As Sergio Garcia In Tax Court
Ben Harris, Automatic Retirement Saving Inches Forward (TaxVox)
Roger McEowen, Another Development In The Tax Implications of Insurance Company Demutualization
Janet Novack, New Study Using IRS Tax Data Shows Rich Are Staying Richer, Poor Poorer
Jim Maule, So How Does This Tax Plan Add Up?
Howard Gleckman, Why the Tax Cuts in the Senate Budget Don’t Add up (TaxVox)
David Cay Johnston, Level Playing Fields Under Attack. (Tax.com). Because we don’t want Wal-Mart to be at the mercy of some guy selling stuff from his basement.
Patrick Temple-West, Senate votes on tax hikes in budget, and more (Tax Break)
TaxGrrrl, You Are Not Alone: R. Kelly Joins Taxpayers Who Have Lost Homes Due To Foreclosure. I’m sure that makes other foreclosed folks feel better.
The road not taken. I left a national accounting firm to start a new firm. A (purported) alumna of the same firm took a somewhat different path. (Going Concern)
Guilty. Dam Guilty. Beavers Convicted: Loans Require Payback (Russ Fox).
Tags: Ben Harris, David Cay Johnston, extensions, Form 4868, Going Concern, Howard Gleckman, Janat Novack, Kay Bell, maule, Patrick Temple-West, Peter Reilly, Roger McEowen, Russ Fox, tax crime, TaxGrrrl, William McBride, William Perez
Posted in Tax Roundup | No Comments »
Wednesday, March 20th, 2013 by Joe Kristan
Iowa cracking down on RV tax scofflows? Southwestiowanews.com reports:
Iowa lawmakers are putting the brakes on those who avoid paying registration fees when buying expensive vehicles.
Under a bill recently approved by the Senate, tax evaders using so-called out-of-state shell corporations to avoid paying registration fees on RVs or other luxury vehicles will face criminal charges and penalties.
Going to jail to save a few bucks on your vehicle registration seems like a bad bet.
More fertilizer! TheGazette.com reports Iowa, Illinois may have bidding war to land new fertilizer plant:
The (Decatur) Herald & Review reports that, according to Illinois officials, Iowa is offering Cronus Chemical LLC an estimated $35 million in taxpayer subsidies to build a plant in Mitchell County near the Minnesota border.
Illinois lawmakers are considering tax breaks in a proposal by state Rep. Adam Brown, a Republican from Champaign. The plant would be built near Tuscola in the east central part of the state.
Hey, Iowa Economic Development people: Illinois is broke. Busted. Played out. They’re not bidding. We don’t need to be bribing fertilizer plants to come here. Instead give us a tax system that’s not so awful that we have to pay people to like us.
Jason Dinesen, Why Would Any Enrolled Agent Support the RTRP Program? :
It baffles me that the National Association of Enrolled Agents is so in love with the RTRP program.
In their weekly newsletter to EAs last week, NAEA bizarrely referred to the unlicensed preparers who brought suit against the IRS over the RTRP program as people who want “the right to remain incompetent.”
NAEA also kissed the government’s butt by praising the “serious and vigorous” IRS attorneys who are appealing the court ruling that struck down the RTRP program. The flowery kissing-up continued as NAEA went on to opine that the government “delivered its A-game” in the appeal.
I have never seen anything good for enrolled agents in the IRS preparer regulations. Enrolled Agents have been around a long time, and they have to meet much higher standards than the RTRPs would. Yet the EA designation is not well understood by the public, and having the IRS officially sanction a lesser credential will probably make it even harder for EAs to get their story out.
William McBride, Tax Policy Center Espouses Minority View on Capital Income Taxes (Tax Policy Blog):
The preponderance of evidence points to corporate taxes being the most harmful to economic growth, followed by personal income taxes, consumption taxes, and property taxes. Notice a pattern? The corporate tax is the largest tax on capital income in most countries, while the personal income tax is the largest tax on labor although it also taxes
capital.
He’s referring to this post we linked on Monday.
Jeremy Scott, Paul Ryan Borrows a Page From Obama’s Playbook (Tax.com): “ Much like Obama, Ryan keeps releasing the same budget every year, knowing full well that it has no chance of becoming law.”
Howard Gleckman, What the Tax Policy Center Really Said About the Ryan Budget (TaxVox). “To the Democrats who so enthusiastically embraced our analysis, thank you for your support. However, we did not say what you wish we had said.”
Jana Luttenegger, Does the IRS Have Your 2009 Refund? (Davis Brown Tax Law Blog)
Kay Bell, 13-plus ways to cut your taxes without itemizing
Paul Neiffer, Don’t Forget Farm Income Averaging. Another break for farmers that nobody else gets.
Jim Maule, The Aggravation of Tax Paperwork
Peter Reilly, Only Modest Valuation Discounts Allowed On Estate Artwork
TaxGrrrl, States, Local Governments Consider Aggressive Tax Collection Efforts To Plug Budget Holes
Joseph Thorndike, It’s Not Too Late for a War Tax (Tax.com)
The Ellen DeGeneres constituency. I thought it funny to see Peter Reilly’s Ellen DeGeneres Speaks Out For Spanish-American War Widowers . But it’s not as far-fetched as I thought. From today’s Des Moines Register:
There are 10 living recipients of benefits tied to the 1898 Spanish-American War at a total cost of about $50,000 per year.
The Civil War payments are going to two children of veterans — one in North Carolina and one in Tennessee — each for $876 per year.
Remember the Maine!
Tags: corporate welfare, economic development, Howard Gleckman, Jana Luttenegger, Jason Dinesen, Jeremy Scott, Joseph Thorndike, Kay Bell, maule, Paul Neiffer, Peter Reilly, TaxGrrrl, William McBride
Posted in Tax Roundup | 2 Comments »
Friday, March 15th, 2013 by Joe Kristan
Calendar-year corporation returns are due today! They are easy to extend on Form 7004 if you can’t finish them today. If you don’t extend an S corporation return and you file late, the penalty starts at $195 for each late K-1, and $195 each for every additional month the return is late.
If Iowa’s tax law were a car, it would look like this.
Joseph Henchman, Iowa House Passes Alternative Maximum Tax: Income Tax Option Clear of Carveouts (Tax Policy Blog). Joseph has some good things to say about the Iowa alternative tax that passed the house this week (HF 478):
I’ve never filled out an Iowa income tax form but it looks like one of the harder state tax returns. Iowa allows you to deduct what you pay in federal income tax, which is nice but is that much more calculation work (and probably drives up tax rates). There are lines for the lump-sum tax, the minimum tax, the K-12 textbook credit, the school district surtax, the motor fuel tax credit, and the earned income tax credit. I’m sure each one of these has their explanations of necessity but together it sounds like a lot of paperwork, record-keeping, and Tax Filing Day frustration.
…
Hence, I’m impressed by a bill passed yesterday (House File 478) by the Iowa House which would offer an alternative to all Iowa taxpayers: a 4.5 percent tax on all income above about $15,000, which no further deductions or exemptions. It’s not perfect: our friend Joe Kristan pointed out that a credit for taxes paid to another state and a deduction for federal interest are probably constitutionally required, and offsetting deductions to certain kinds of income (allowing gambling losses if you tax gambling winnings) is good policy. But as Joe said, the bill “is a welcome step towards improving Iowa’s income tax.”
I’m hoping it’s a step towards the Tax Update Quick and Dirty Iowa Tax Reform Plan.
It’s a myth, so they’re cracking down on it!
Huffington Post, The Millionaire Migration Myth: Don’t Fall for This Anti-Tax Scare Tactic.
Bloomberg News, States Crack Down on Top Earners Who Flee as Levies Rise: Taxes
If they feel have to “crack down” on something, maybe there’s something to that myth.
The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.
Janet Novack, Blame Congress, As Well As H&R Block And IRS, For College Tax Credit Mess. Oh, I do! From the article:
Far be it from me to let either the Internal Revenue Service or tax prep giant H&R Block off the hook for the current mess which has delayed refunds for more than 600,000 taxpayers claiming college tax credits by up to eight weeks. In addition to their operational missteps, both did a poor job (at least initially) of communicating with taxpayers who desperately need those refunds to pay tuition or other bills.
But let’s put some of the blame where it rightly belongs: on the Washington politicians. For more than two decades, Congress has been expanding “tax expenditures” with little regard for how complicated such provisions might be for taxpayers to use and for the IRS to administer, let alone for whether they do enough good to justify their cost and the economic distortions they create. A new 1065-page Congressional Research Service compendium lists 250 different tax expenditures. Happy reading.
Every little break like this diverts IRS resources from actually collecting income taxes and makes the income tax a little less effective and useful. Yet Congress still sees the tax law as the Swiss Army Knife of public policy.
Jim Maule, Tax Depreciation: Do the Math:
No matter how well a student in the basic tax course masters the depreciation deduction to the extent it is studied, that student knows that the total depreciation with respect to a property cannot exceed its cost. All of the students would find themselves bewildered by the proposition that depreciation deductions on a property that cost $34,799 would total $56,000.
So was the Tax Court.
Tony Nitti, Golfer Sergio Garcia Comes Up Short In Tax Court, But Is The Decision A Victory For Other Athletes? He won on his endorsement royalty income, so while he may not have had an undisputed win, he did OK, like a PGA golfer who gets second-place prize money.
William Perez, Delays in Issuing Tax Refunds Related to Education Tax Credits
Going Concern, IRS Won’t Be Sorry If You Never Get Around to Claiming Your Refund. Over $900 million in 2009 refunds will be out of reach of their rightful recipients after April 15, when the 3-year window for claiming them expires.
Trish McIntire, Don’t Lose Your 2009 Refund
Paul Neiffer, Will Large Farmers Be Able to Use Cash Method in the Future?! Farmers should get the same tax rules and breaks everyone else does, no less and no more.
Kay Bell, Will a relationship neutral tax code save traditional marriage?. Not every problem is a tax problem.
Howard Gleckman, The Ideological Chasm Between the House and Senate Budgets
William McBride, Dave Camp Floats a Rewrite of Small Business Tax Rules (Tax Policy Blog)
Jack Townsend, U.S. Taxpayer Pleads to FBAR and Tax Perjury Violation
Brian Mahany, IRS Agent May Be Headed To Prison For Info Leak – Whistleblower Protection
Brian Strahle, State Tax Revenues: Corporate Income Tax Not That Important?
Oh, Goody. Applying for Obamacare Subsidies Will Be as Complicated as Doing Your Taxes (Megan McArdle)
Argo pay your taxes. It turns out Iowa isn’t the only government whose film tax credits attract scammers. From London comes this via Boston.com:
In some ways ‘‘A Landscape of Lies’’ was a typical indie film, with a tiny budget, a B-list cast and an award from an American film festival.
What made it special is that it was created solely to cover up a huge tax fraud.
…
In fact, officials say, the project was a sham, set up to claim almost 1.5 million pounds in goods and services tax for work that had not been done, as well as 1.3 million pounds under a government program that allows filmmakers to claim back up to 25 percent of their expenditure as tax relief.
No word on whether Leo Bloom prepared the fraudulent returns.
News you can use: Polish Up Your Guccis. (Christopher Bergin, Tax.com).
Will there be tax reform? I think there has to be. But I don’t think it will look like theTax Reform Act of 1986 because, in short, it’s not 1986, and we don’t have the same problems or even the same tax system. That doesn’t mean there aren’t a lot of lessons to be learned from the ’86 experience. But I don’t think tax reform will happen soon. And a few of the reasons I think that come right out of “Gucci Gulch.”
I have a copy of Showdown at Gucci Gulch, the book about how the 1986 tax reforms were enacted. I haven’t brought myself to open it; it seems too much like reading about my job.
TaxGrrrl, Arrest of Dancing Mascot Puts Liberty Tax Wavers In The Spotlight
He should have hidden the cash across the pond. Opening statements underway in Beavers tax evasion trial (WGNtv.com)
Tags: Anthony Nitti, Beavers, Brian Mahany, Brian Strahle, Christopher Bergin, film tax credits, Going Concern, Howard Gleckman, iowa tax policy, Jack Townsend, Janet Novack, Joseph Henchman, Kay Bell, maule, megan mcardle, Paul Neiffer, Quick and Dirty Iowa Tax Reform Plan, TaxGrrrl, Trish McIntire, William McBride, William Perez
Posted in Uncategorized | 1 Comment »
Friday, March 8th, 2013 by Joe Kristan
Illegal procedure. Former Chicago Bear Chris Zorich has been flagged. CBS Chicago reports:
Zorich, 43, was charged Thursday with four misdemeanor counts of failing to file federal income tax returns, for the years 2006 through 2009, according to the U.S. Attorney’s office. During that time, he allegedly had an income of more than $1 million.
Federal prosecutors said Zorich was cooperating with the investigation and has agreed to plead guilty.
His lawyer says that he owes no more than $70,000 after withholding on the non-filed years is applied.
I wonder why he was charged. While it’s a bad idea, it’s not extremely rare for people to just get behind on filing their returns. It doesn’t usually lead to criminal charges. Much of his income for the years at issue was W-2 income, so it wasn’t as though the IRS would miss him.
Perhaps he did something to annoy an examiner enough to call in the Criminal Division. Maybe it’s because he is an attorney [update: he apparently never passed the bar exam]. Or maybe he’s just unlucky to be famous-enough for the IRS to use his celebrity to frighten the rest of us into getting our returns done. (Via Reason 24/7)
Update: This Chicago Tribune report suggests that self-dealing with his charitable foundation may have been a factor.
In other tax crime news:
Jack Townsend: Article on Deterrence Through Criminal Enforcement and Defining Tax Shelters
Miami Vice: Two Miami Officers Accused Of Tax Refund Fraud (CBS Miami)
William Perez, Tips for Preparing Form 1040-EZ
Janet Novack, IRS Yanks Criminal Amnesty Deal From Taxpayers With Secret Bank Leumi Accounts. If the IRS turns on taxpayers who turned themselves in under an amnesty, not many folks will participate in another one.
Russ Fox, When the IRS Changes the Rules Midstream in a Legal Matter…
J.D. Tuccile, As Government Grasps For Taxes, Brace for an Unwinnable War Against You (Reason.com). It’s a long-form essay on the way getting all sorts of social services from the government doesn’t make people happy to pay their taxes. This is interesting:
Those who think tax increases alone can solve our ongoing fiscal disaster are just kidding themselves.
Paul Neiffer, What Are W2 Wages for DPAD? You have to have paid W-2 wages to use the Section 199 deduction. But they don’t all work:
These wages cannot include wages paid to your children under age 18 (if a sole proprietor farmer) and commodity wages. However, wages paid in cash to spouses and children over age 17 are allowed as part of these wages.
If you are a schedule F farmer with no employees, the W-2 requirement makes the Section 199 deduction worthless.
Jim Maule, Selecting a Tax Return Preparer. All sound advice, including this:
Seventh, ask the tax professional about data security. Where and how is paper data stored while in the hands of the preparer? Where is the digital data stored? What precautions are in place to minimize the chances of a third party breaking into the office or the digital servers and obtaining information? If the individual hands over paper records without keeping copies, which is an unwise move, what happens if the tax professional’s office burns down?
Something to think about.
Nanette Byrnes, State defections impact U.S. interstate tax compact (Tax Break)
TaxGrrrl, Taxes From A To Z (2013): D Is For Disaster Relief
William McBride, Latest IRS Data Shows Taxable Returns Remain Below 1997 Levels (Tax Policy Blog). The income tax burden falls on fewer and fewer returns.
Howard Gleckman, Build America Bonds, the Medicaid Expansion, and Trust Between the States and the Feds
Tony Nitti, Congress Looks To The Wealthy To Bail Out Social Security. But the rich guy isn’t buying.
If you ever wonder why California is the Titanic of state governments, you might want to read Kay Bell’s latest, Tax on email suggested as way to help fund U.S. Postal Service:
Berkeley City Councilman Gordon Wozniak has tossed out the idea of an email tax to help save snail mail.
The financial straits of the U.S. Postal Service became an issue for Berkeley lawmakers when the paper mail delivery system proposed closing that northern California city’s downtown post office and selling the building.
It won’t happen, but a state where somebody who thinks it could happen can be elected to public office is pretty much doomed.
Tags: Anthony Nitti, Chris Zorich, Howard Gleckman, identity theft, J.D. Tuccile, Jack Townsend, Janet Novack, Kay Bell, maule, Nanette Byrnes, Paul Neiffer, Russ Fox, tax crime, TaxGrrrl, William McBride, William Perez
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Thursday, March 7th, 2013 by Joe Kristan
Answering the wrong questions. The Iowa Chamber Alliance asked a consulting firm that makes money playing the corporate location incentives game whether Iowa should sweeten its corporate location incentives. Guess how they answered it.
From an Iowa Chamber Alliance press release:
“Iowa has a solid base of state - level economic development incentives tools upon which to build. However, to become more competitive, Iowa may wish to increase the funding level and flexibility of some of the State’s key incentive programs” states Darin Buelow, a Principal with Deloitte Consulting LLP.
It’s hard to imagine the study coming to a different conclusion considering what they were looking for:
At the request of the Iowa Chamber Alliance (ICA), Deloitte Consulting (Deloitte) benchmarked incentives programs in Iowa and in five alternate states, focusing on a high-level analysis of state-level incentive programs, their value, and overall effectiveness in attracting investors.
In other words, they were to look at whether Iowa has more and better giveaways than its neighbors.
I looked for the study in vain for any analysis of the value of Iowa’s tax credits to the economy vs. alternative uses for the funds — like lowering the tax rates of the rest of us who pay for them. There is no mention of “opportunity cost.” In looking at the “value” of the programs, it makes unsupported conclusions like this one about the “High Quality Jobs Program:”
Considered effective and competitive in providing benefits to mitigate corporate income tax, refunding sales tax for construction and providing a supplemental refundable research credit.
Considered effective by whom? On what basis? It doesn’t say.
The study says Iowa should enrich its data center corporate welfare — where the rest of us subsidize the infrastructure of Microsoft and Apple. They also recomment Iowa “consider allowing sale, refund or transfer” of tax credits.
A few years ago, after the film tax credit disaster, Governor Culver tasked a panel with reviewing the effectiveness of Iowa’s dozens of tax credits. Their report failed to come up with a clear benefit for any of Iowa’s tax credits. The panel also had this to say about transferable tax credits: (my emphasis)
Transferability of tax credits complicates the projection of revenues and the tracking of credits, creates uncertainty about when credits will be claimed because the purchasing entity may utilize a different fiscal year than the entity awarded the credit, and siphons resources from awarded entities through brokerage fees… Once tax credits are transferred, it creates limited recourse for the State to recover funds claimed in instances where the business awarded the original credit does not fulfill the contracted obligations or if the credit was awarded in error. Additionally, transferability has also resulted in abuses in some tax credit programs.
It would be better Iowa to not “compete” in taxing its current taxpayers to lure and subsidize their competitors. Instead Iowa should enact a tax system good enough that we don’t have to pay people to be our friends. The Quick and Dirty Iowa Tax Reform Plan would be better for Iowa businesses than any number of pocket-picking tax credits.
Poor legal move. From Bloomberglaw.com:
Former Kirkland & Ellis LP senior partner Theodore Freedman pleaded guilty to fraud in connection with the filing of false tax forms.
Freedman changed his plea yesterday from not guilty to guilty of four counts of tax fraud. U.S. District Judge Deborah Batts in Manhattan accepted the plea and set sentencing for Sept. 17. Freedman’s lawyers reached a plea agreement with U.S. attorneys.
Indicted in July 2011, Freedman misrepresented his income as a partner at the law firm by about $2 million, the U.S. said. He also claimed more than $500,000 in expenses for a sole proprietorship that didn’t exist, the government said.
It’s hard to imagine how he thought this would work. K-1s get matched against tax returns, at least occasionally. The IRS matching system is cumbersome and inefficient, but it works well enough that you can’t habitually ignore K-1s with six-figure income. Furthermore, claiming big bogus Schedule C losses like that is practically an engraved invitation for the IRS to visit your return.
Related: Former Kirkland & Ellis Partner Pleads to Tax Crimes (Jack Townsend)
The Colonel knows why your business might have to file returns in other states. My new post at IowaBiz.com, The Des Moines Business Record blog for entrepreneurs.
William McBride, The Carried Interest Debate: Funding Government for 3.1 Hours (Tax Policy Blog).
Patrick Temple-West, Cadbury gets tax bill in India, and more (Tax Break).
Daniel Shaviro, Skepticism about “fundamental tax reform”
Angie Picardo, Grads – Filing for First the Time (Missouri Tax Guy guest-post)
Brian Strahle, D.C. Combined Reporting – Transition Rules for 3/15 and 4/15!
Janet Novack, New IRS Data: Rich Got Richer, But Paid Lower Tax Rate As Stocks Gained
William Perez, Child Tax Credit for 2012
There’s a new Cavalcade of Risk up at Health Business Blog. It’s always worth the ride at the blog world’s roundup of insurance and risk management!
Is that an argument for or against intelligent design? The Sequester: ‘Designed to be Stupid’ (Cara Griffith, Tax.com).
Because they aren’t in a position to speak for themselves: Ellen DeGeneres Speaks Out For Spanish-American War Widowers (Peter Reilly).
The Critical Question: Why Is Amy Poehler Going To Hell? And What Does Taylor Swift Have To Do With It? (TaxGrrrl)
Programming note: This site was pretty much shut down part of yesterday afternoon. Our valiant hosting service says it was a comment spam attack on the pre-2012 archived posts. Sorry about that.
Tags: Angie Picardo, Brian Strahle, cavalcade of risk, corporate welfare, Daniel Shaviro, economic development, iowa tax policy, iowabiz.com, Jack Townsend, Janet Novack, Patrick Temple-West, Peter Reilly, Quick and Dirty Iowa Tax Reform Plan, tax credits, tax crime, TaxGrrrl, The Critical Question, William McBride, William Perez
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Tuesday, March 5th, 2013 by Joe Kristan
“Ultimate Swiss Army Knife” image courtesy redjar under Creative Commons license.
The Iowa income tax as Swiss Army Knife. The Iowa Senate Veterans Affairs Committee yesterday sent to the floor a proposal for up to $1,500 in tax credits for hiring an Iowa resident who is “a member of the national guard, reserve, or regular omponent of the armed forces of the United States” for a job of at least 30 hours a week. The bill would also give an additional $500 tax credit for each year the employee is called to active service for at least 30 days.
SSB 1064 cleared the committee unanimously. After all, who would vote against the “Hire a Hero Tax Credit?” But this is a classic example of a feel-good tax provision that clutters the tax law, is very difficult to enforce, and would not accomplish enough to be worth the trouble.
Nobody will hire an employee just to get a $1,500 tax credit. You hire somebody because you have work to do. Because it’s so hard to find and keep good employees, you hire the person you think is most likely to work out; the cost of a hiring mistake can be a lot more than $1,500. It will be hard to enforce — especially the provision saying the credit is unavailable if the new employee replaces another “eligible employee.” Will the state really examine that? Like many credits, it won’t change behavior; it will just be harvested by taxpayers who would have hired the same military people anyway.
Still, why not make a nice gesture to show our voters how much we care? Because every feel-good tax break has a cost. It costs money to comply with and enforce. It also creates a new anti-tax reform interest group; any attempt to clear away expensive and ineffective tax breaks to make a better tax system for everyone will be fought by those few that collect it. It makes a good tax system for everyone just a little bit harder.
The primary purpose of the tax law is to finance government operations. When it become a Swiss Army Knife of public policy, it becomes a little less effective at its real job every time you add a new gadget.
Swiss Bank corpse fined $58 million for tax cheating. The Wegelin Bank, which is closing as a result of its legal troubles, was sentenced yesterday to pay a $58 million tax evasion fine for helping clients evade U.S. taxes. Robert W. Wood has more.
Patrick Temple-West, Wegelin withers under U.S. tax scrutiny, and more (Tax Break)
While whistleblower Bradley Birkenfeld had a big role in bringing down the Swiss bank tax evasion industry, the IRS continues to resist paying out whistleblower awards. While Mr. Birkenfeld scored $104 million for his snitching, Lynnley Browning reports that the IRS remains loath to pay for information:
In January, Sen. Charles Grassley, the 79-year-old Iowa Republican, chastised acting IRS commissioner Steven Miller over his recent proposal to restrict the agency’s whistleblower program, already an object of criticism since its creation in 2006. The proposed curbs, Grassley wrote in a letter to Miller, showed one thing: that the IRS and its boss, the Treasury Department, “view whistleblowers with hostility.”
What exactly is at issue? The current whistleblower rules say a tipster can collect a reward of 15%-30% of proceeds brought in as a direct result of a tip. The dirt has to involve tax evasion of at least $2 million or tax fraud by an individual making at least $200,000 a year.
Miller’s proposed restrictions will likely shrink payouts. Among the curbs: making it nearly impossible for whistleblowers to share in rewards stemming from a company’s inflation of losses, and excluding from rewards any money brought in from so-called Fbar fines.
Apparently the IRS would rather spend its time making experienced preparers take stupid open book tests for permission to continue what they have been doing for years than to actually pursue tax cheats. Only two whistleblower claims have been paid out, but the IRS feels it has plenty of time and resources to appeal the shutdown of its preparer regulation program.
William McBride, How do Taxes and Spending Affect Economic Growth? (Tax Policy Blog) “The worst option of all, according to a huge preponderance of evidence, is to replace the sequester spending cuts with higher income taxes.”
Russ Fox, IRS Opens for All. We can e-file all the forms.
TaxGrrrl,IRS Now Accepting All Individual Returns
Paul Neiffer, IRS Announces They Are Processing All Remaining Tax Forms
Jeremy Scott, Is the U.S. Tax Gap as Big as Italy’s? (Tax.com). “But numbers from a New York Times article about Italian tax evasion suggest that the United States isn’t doing much better than one of Europe’s most notoriously inefficient tax collectors.”
Jack Townsend, Second Circuit Holds That Fraud on the Return — Even If Not the Taxpayer’s — Causes an Unlimited Civil Assessment Statute of Limitations to Apply
Linda Beale, Jenkins & Gilchrist attorney sentenced to 8 years for tax shelter work
Yes. Minnesota Tax Reform: Poorly Designed?? (Brian Strahle).
Kay Bell, Tax Carnival #114: March 2013 Tax Lions and Lambs
Good. Pennsylvania Is Trying to Ditch the Attest Hour Requirement for New CPAs (Going Concern). If you want to do tax work for a living, why waste two years doing audit work that you hate?
I don’t condone the behavior, but I bet every bus driver dreams it. From WQAD.com:
Two Iowa bus drivers lost their jobs after being accused of racing school buses filled with students.
According to police the two drivers were returning with students from a Valentine’s Day field trip when one driver turned the ride into a race.
The students were first graders from Iowa Falls. Nobody was hurt.
I might not make a very good bus driver. I’d probably always be racing…
Tags: Brad Birkenfeld, Brian Strahle, Going Concern, Grassley, iowa tax policy, Jack Tomwsend, Jeremy Scott, Kay Bell, Linda Beale, Patrick Temple-West, Paul Neiffer, Robert Wood, Russ Fox, Swiss Army Knife, TaxGrrrl, William McBride
Posted in Eye on the Legislature, Eye on the Legislature 2013, Tax Roundup | No Comments »
Monday, March 4th, 2013 by Joe Kristan
A federal judge Friday sentenced a key player in the once-lucrative Jenkens & Gilchrist tax shelter practice to eight years in prison. From the AP:
U.S. District Judge William H. Pauley III sentenced 52-year-old Donna Guerin, of Scottsdale, Ariz., after she pleaded guilty to conspiracy to defraud the United States and tax evasion. He ordered her to pay $190 million in restitution besides the $1.6 million she agreed to forfeit when she pleaded guilty in September.
Guerin, a former partner at Jenkens & Gilchrist, a Texas-based law firm with offices throughout the United States, had admitted that she helped market tax shelters from 1994 through 2004 to some of the world’s richest investors, including the late sports entrepreneur Lamar Hunt, trust fund recipients, investors, a grandson of the late industrialist Armand Hammer and one of the earliest investors in Microsoft Corp.
The biggest prosecution target at Jenkens, Paul Daugerdas, faces his second trial on the charges in September. His 2011 trial was voided because of juror misconduct.
Jenkens was one of the big players in the tax shelter industry that sprung up among big law and accounting firms in the 1990s. It shut down in 2007 after entering a non-prosecution agreement with the Justice Department.
Sort of related: Ernst & Young Admits That Some of Its Partners Were Running a Tax Shelter Factory (Going Concern); Ernst & Young Pays $123 Million, Avoids Tax Shelter Prosecution (Janet Novack)
Robert Goulder, Questioning the Longevity of the Income Tax (Tax.com):
Dare we attempt to guess what the income tax might look like in another 100 years?
Personally I think it will still exist, but it will have company. The big question for policymakers is whether it should operate as a “mass” tax — as it strives to do today — or whether it will function as a “class” tax that applies only to the upper income strata. Given that roughly 47% of American households currently don’t pay the income tax (distinguished from payroll taxes, which almost everyone pays), one could argue it is already starting to resemble a class tax. Perhaps the future is already here.
I can state with some confidence that if there is an income tax in 2113, I won’t be preparing returns.
Jack Townsend, Fraud on the Return — Even If Not the Taxpayer’s — Causes an Unlimited Civil Assessment Statute of Limitations to Apply. This is an ugly result caused by an in-house accountant who stole funds meant for payroll taxes. The Second Circuit overturned the Tax Court and held that the employee’s fraud meant that the employer’s statute of limitations never closed for tax assessment purposes.
Russ Fox has a helpful tip: A Sure-Fire Way to Get Indicted
There are many ways to get in trouble with tax law. As I have said in the past, if you want to get indicted it’s a bit harder. It helps to be a celebrity, have a very large tax debt, not report large amounts of funds in foreign financial accounts, or abscond with trust fund taxes. I need to add another item to that list: File liens against IRS employees who are investigating you.
For some reason, they respond badly to that.
William McBride, BEA: Personal Income Drops 3.6 Percent in January, the Most since the Clinton Tax Increase of 1993 (Tax Policy Blog). It wouldn’t be shocking if a lot of folks moved income up to 2012 to avoid the 2013 tax increases.
Kay Bell, Don’t forget about your traditional or Roth 401(k)
Paul Neiffer, When an UPREIT Might Make Sense
Trish McIntire, Catching Up On the News, a rundown of issues practitioners are running into during filing season.
TaxGrrrl, If You Qualify, File Your Taxes For Free
Tony Nitti, Competing Senate Bills Fail; Sequestration Is Here (For Now)
Howard Gleckman,Sequester, We Hardly Knew Ye (TaxVox)
Kaye Thomas, The Mindbending World of Wash Sale Calculations.
David Cay Johnston, Good News for Investors and Taxpayers (Tax.com)
Martin Sullivan, Red Hot REITs Fire-up Low Tech (Tax.com)
Peter Reilly, Time To Eliminate Joint Filing ? No, it’s not actually related to the next article.
News you can use. Leff: Medical Marijuana Providers Can Beat Oppressive Federal Taxes by Operating as Non-Profits. (TaxProf)
Tags: Anthony Nitti, David Cay Johnston, Ernst & Young, Going Concern, Howard Gleckman, Jack Townsend, Janet Novack, Jenkens & Gilchrist, Kay Bell, Kaye Thomas, Martin Sullivan, Paul Neiffer, Peter Reilly, Robert Goulder, Russ Fox, tax crime, tax shelters, TaxGrrrl, TaxProf, Trish McIntier, William McBride
Posted in Tax Roundup, Tax Shelter News | No Comments »
Friday, March 1st, 2013 by Joe Kristan
Post-sequester commuting.
So the sequester takes effect. That made my commute like “Mad Max,” where I threaded my car between craters on shattered, lawless roadways before picking up the office Friday bagels, ignoring les miserables begging for a bagel crumb outside the door.
Well, OK, it was like my usual Friday commute, but with snow. But we will keep our eyes open for the chaos we know is right around the corner!
Iowa Senate advances limited property tax bill. The Sioux City Journal reports:
Senate Study Bill 1136, which passed the Senate Ways and Means Committee on a 9-6 party-line vote, would enable all businesses to be taxed at a lower rate on the first $324,000 of their assessed property value. Commercial property values above that threshold would be taxed at the current 100 percent rate.
$324,ooo isn’t really that much property for a business, even at Iowa property values. The Governor proposes to reduce the taxable value to 80% of the value for all commercial property over four years.
House GOP advances “flat tax” idea (Radio Iowa). The Iowa House Ways and Means Committee sent HF 3 t0 the House floor yesterday. The bill would enact an optional income tax of 4.5% of adjusted gross income; taxpayers could elect to file under the HF 3 system or Iowa’s current system.
I don’t see this as a serious effort to pass a bill, given the flaws in using AGI as a tax base that I have pointed out. It has next to no chance of approval in the Iowa Senate, controlled by Democrats. At best it’s an attempt to keep much-needed income tax reform alive at a time when the Governor seems only interested in property taxes. Maybe next time they’ll get serious and pursue The Tax Update Quick and Dirty Iowa Tax Reform Plan.
Russ Fox, Important Court Ruling for Entities Owned by Californians Located Outside of California. A California owner shouldn’t by itself make your corporation taxable there.
TaxProf, Dow Chemical Loses $1 Billion Tax Shelter Case
Brian Mahany, Dow Chemical Suffers Billion Dollar Tax Shelter Loss – Accounting Malpractice
Jack Townsend, Mr. Cummings’ Defense of Aggressive Tax Shelter Professionals
Kyle Pomerleau and William McBride, Another Misleading Analysis of Income Inequality (with Pictures!) (Tax Policy Blog). They call out David Cay Johnston.
Martin Sullivan, A Moral Obligation to Aggressively Lobby (Tax.com)
Signs of sequester apocalypse:
TaxProf, The Impact of Sequestration on the IRS
Kay Bell, Despite sequestration, IRS plans to continue filing season as planned, start accepting more updated forms next week
TaxGrrrl, IRS Won’t Delay Tax Season For Sequestration
Howard Gleckman, The Sequester is Not Too Big, It is Too Stupid
Patrick Temple-West, Obama sees leverage in tax fight, and more
Paul Neiffer, Farmers Should Be Able to File Tax Returns by Monday
The Saratogian, Rapper Ja Rule in New York City jail on tax evasion charges; scheduled for July release
Huffington Post: Matthew Bender, Detroit Tax Preparer, Charged with Fraud For Preparing False Returns. Really, since Lexis-Nexis pulled the plug, it’s been all downhill for him.
Going Concern, Let the sequester blamestorming begin!
Tags: Brian Mahany, Going Concern, Howard Gleckman, Ja Rule, Jack Townsend, Kay Bell, Kyle Pomerleau, Martin Sullivan, Patrick Temple-West, Paul Neiffer, Russ Fox, sequestration, tax crime, TaxGrrrl, TaxProf, William McBride
Posted in Eye on the Legislature, Eye on the Legislature 2013, Tax Roundup | No Comments »
Thursday, February 21st, 2013 by Joe Kristan
I arrived from out-of-town late, so I’m off to a late start this morning, so the roundup is abbreviated today.
Russ Roberts, Why so many Americans pay no income tax. “I still think we should get rid of the payroll tax and raise income tax rates.”
TaxProf, Supreme Court Hears Oral Argument in PPL Corp. v. Commissioner, involving a foreign tax credit shelter.
Kay Bell, Travel tracking apps, website can help at tax time. Nothing says auto business logs have to be on paper.
Christopher Bergin, Leaving the IRS: A True Tax Pro (Tax.com) On the retirement of Deborah Butler.
Jim Maule, Tax Commercial’s False Facts Perpetuates Falsehood. If the ad’s error on the length of the Internal Revenue Code is the only thing wrong, that may actually be progress, sadly.
TaxGrrrl, Five Ways To Pay Your Taxes When You Don’t Have The Cash
Trish McIntire, OIC Calculator. When you absolutely, positively can’t pay.
William McBride, Bowles Simpson Call for More Taxes, More Growth
Patrick Temple-West, Sequester talks grow harsh, and more (Tax Break)
Sure the murder charges are serious, but don’t let them find out about the offshore bank accounts! Pistorius’ Brother and Lawyer Allegedly Removed Documents from the Crime Scene Related to Offshore Bank Accounts (Jack Townsend).
Paul Neiffer, Good News for Blackberry, Raspberry and Papaya Farmers. You know who you are.
A new Cavalcade of Risk is up at Nerd Wallet.
Today’s career tip: Bad Spelling Can Derail an Otherwise Promising Career in Fraud (Going Concern)
Tags: cavalcade of risk, Christopher Bergin, Going Concern, Jack Townsend, Kay Bell, maule, Patrick Temple-West, Paul Neiffer, Russ Roberts, TaxGrrrl, TaxProf, Trish McIntire, William McBride
Posted in Uncategorized | No Comments »
Tuesday, February 12th, 2013 by Joe Kristan
Meanwhile, somewhere an ID thief is trying to get cash from an ATM with a peanut butter sandwich. TBO.com reports:
A 6-year-old pupil at Symmes Elementary School in Riverview was asked to take her homework out of her backpack, according to Cpl. Bruce Crumpler of the Hillsborough County Sheriff’s Office.
The girl reached into her bag and pulled out a baggie containing 52 debit cards, Crumpler said.
The cards, which can be used as accounts for depositing tax refunds are commonly used by people who use stolen personal identities to file tax returns to obtain fraudulent refunds.
Maybe she’s the little princess of tax fraud. Meanwhile, the same TBO.com has an update on Rashia Wilson, who allegedly proclaimed herself the “Queen of IRS Tax Fraud:”
Wilson may not have been the biggest player in Tampa’s income tax fraud explosion, but she was one of the most brazen — “flashy,” a sheriff’s investigator called her, “in your face about it.”
The affidavits show Wilson even had a picture of herself with a cool smile on her face, wearing an oversized jewel-encrusted pendant spelling out her first name as she held bundles of cash.
“YES I’M RASHIA THE QUEEN OF IRS TAX FRAUD,” reads a May posting on her Facebook page described in the affidavits. “IM’ A MILLIONAIRE FOR THE RECORD SO IF U THINK INDICTING ME WILL BE EASY IT WONT I PROMISE U!”
Easier than she thought, apparently. She has been indicted on 57 federal tax fraud charges for collecting $1.3 million through fake tax returns, apparently claiming earned income credits and refundable education credits. That should make the politicians think twice before they expand these fraud-ridden credits, but it won’t.
How many lawyers does it take to lose a tax case? 15. At least that’s how many lawyers were listed on the losing side yesterday in Bank of New York Mellon Corp., a Tax Court case disallowing foreign tax credits in a tax shelter case. Six lawyers are listed on the IRS side, for a total of 21. The losing side was led by former IRS Chief Counsel B. John Williams. If nothing else, the legal expense deductions should take a bite out of the losing side’s tax bill. The TaxProf has more.
Iowa’s push for a 4.5% optional flat tax — which I call an “alternative maximum tax” – puzzles David Brunori ($link)
Many liberals in Iowa are complaining that a flat tax wouldn’t require the rich to pay their fair share, whatever that means. But a lot of those people seem more interested in soaking the rich than in helping the poor. Personally, I am much more in favor of reducing the tax burdens on the poor and dispossessed than I am in making rich people suffer.
I think a flat income tax with few deductions (and a sizable exemption for low-income people) is the way to go. I’m unsure why the state would continue its horribly complicated personal income tax system that benefits return preparers, tax lawyers, and tax accountants.
It’s because of a peculiarity of Iowa politics. The powerful lobbying group Iowans for Tax Relief opposes a repeal of the Iowa deduction for federal taxes paid. ITR has shown that it can provoke successful primary challenges of Republican legislators who displease the Muscatine-based lobby. Yet significant rate reduction is impossible if the deduction is retained. Making the lower rate an “alternative” rather than a replacement appeases Muscatine, though at a cost in incoherence.
Will we see a revival in enforcement of the accumulated earnings tax? The obscure depression-era tax on C corporations that retain cash in excess of their “needs,” as second-guessed by the IRS, is rarely asserted. With left-side economists like Paul Krugman asserting that corporate cash-hoarding is one reason why the economy remains weak, don’t be surprised if his friends in the Obama administration try to revive enforcement of this archaic and foolish penalty tax. (Via Tyler Cowen).
William McBride, CBO Projections of Spending and Tax Credits (Tax Policy Blog):
As the chart below shows, mandatory spending represents the majority of the federal budget, and the part that has grown most dramatically in recent years. Mandatory spending was about 10 percent of GDP for most of the 30 years prior to 2008. It leapt to 15 percent of GDP in 2009 and now remains at 13.1 percent. It is projected to increase to 14.1 percent of GDP by 2023. Meanwhile, discretionary spending, on programs like defense, roads, and other infrastructure, is on a steady decline. Discretionary spending is now 8.3 percent of GDP and set to go to a 50 year low of 5.5 percent of GDP by 2023.
No spending is really “mandatory.” Congress and the President can always change the “mandatory” programs. And they will, or we will face fiscal disaster and crushing taxes.
Paul Neiffer, Farmer Filing Due Date Update
Yes. Will Obama’s Call for Tax Reform Ring Hollow? (Jeremy Scott, Tax.com).
TaxGrrrl, A Beginner’s Guide To Taxes: Do I Need To Hire A Tax Preparer Or Can I Do My Return Myself?
William Perez, Finding the Right Filing Status
Patrick Temple-West, Sandy damage leads to tax trouble, and more (Tax Break)
Peter Reilly, Co-op Owner Wins Casualty Loss Appeal
Missouri Tax Guy, Safeguarding Financial Records
Brian Strahle, Delaware’s NEW Voluntary Disclosure Program for Unclaimed Property: Should You Utilize It?
Jack Townsend, Good Faith as a Defense to Tax Crimes
The Critical Question: Would a Carbon Tax and Corporate Tax Reform Taste Great Together? (Donald Marron, TaxVox).
Kay Bell, Man gets $161,392 erroneous tax refund. And in this case he didn’t even ask for it.
Tags: Brian Strahle, David Brunori, Donald Marron., identity theft, iowa tax policy, Iowans for Tax Relief, Jack Townsend, Jeremy Scott, Kay Bell, Missouri Tax Guy, Patrick Temple-West, Paul Krugman, Paul Neiffer, Peter Reilly, tax crime, TaxGrrrl, TaxProf, Tyler Cowen, William McBride, William Perez
Posted in Tax Roundup | 3 Comments »
Wednesday, February 6th, 2013 by Joe Kristan
Shock! David Osterberg doesn’t like the 4.5% flat Iowa Income tax proposal! State Tax Notes tracked down former Senate Candidate and Cornell College Econ Prof* David Osterberg for his views on the proposal to create a flat 4.5% income tax in Iowa alongside the current income tax. Not surprisingly, he doesn’t like it ($link):
The founder and executive director of the Iowa Policy Project said a Republican-sponsored House bill to create a flat personal income tax option would shift more of the tax burden to low-income residents.
But David Osterberg said he is not too concerned because he doesn’t think the proposal has a shot at passing the Senate, where Democrats hold a majority…The proposal is “part of this ideology that says we somehow have to take care of the top 1 percent and things will be good,” Osterberg said. “I don’t think low-income people believe that — we sure don’t.”
State Tax Notes also tracked down Tax Foundation Economist Elizabeth Malm:
“Iowa’s current income tax system has nine brackets, with rates ranging from 0.36 percent of income to 8.98 percent of income,” Malm said in an e-mail to Tax Analysts. “In 2012, this made Iowa the fifth highest top income tax rate in the country, among those states that levy PITs.”
Without additional information, Malm declined to say whether the plan is regressive. She did say, however, that the proposal would fail to simplify the tax code because it keeps the current system intact.
“I’m guessing the rationale behind allowing taxpayers to choose between the two systems is to ease concerns that the flat 4.5 rate would hit low-income individuals harder,” Malm said.
Wrong guess. The rationale is almost surely to avoid provoking the powerful lobby group Iowans for Tax Relief, which holds sacred the current Iowa individual deduction for federal taxes paid. Proposing the flat tax as an alternative, rather than a replacement, finesses that problem — but at the cost of adding more complexity. In this form, the flat tax is what I call an “Alternative Maximum Tax.”
*Disclosure: I once borrowed his shotgun at Cornell. It had dust bunnies in the tubes.
David Brunori, Who Pays? Who Cares? You Should (Tax.com):
No matter your views on government, there is no justification for asking the poor to pay more than the rich. I do not favor dramatically increasing the tax burdens on the wealthy, particularly income tax burdens. But there are a lot of policies that can be enacted that could even the playing field. Broader base consumption taxes, less reliance on excise taxes, and larger income exemptions for low wage taxpayers would go a long way.
None of these are incompatible with lower top tax rates.
Tracy Gordon, The Downside of States as Laboratories for Tax Reform (TaxVox)
Needed, but impossible. Tax Notes has a sad-but-true headline that brilliantly summarizes the state of our national tax policy: Urban Institute Panelists Agree Tax Reform Necessary but Unlikely. ($link)
Linda Beale, More on PTINs for previously unregulated tax return preparers:
We have seen considerable evidence of tax return preparers who do not understand the tax laws or who intentionally misapply them (in the home office deduction, etc.). It is imperative that those who assist others in preparing tax returns demonstrate minimal competency in the tax law as demonstrated by the qualifying exam.
The “qualifying exam” is open book — really more of a literacy test. The IRS can make preparers show they can read. They can’t make them competent. When you consider the Big 4 tax shelter scandals, and the hopeless complexity of the tax law, it’s funny to say that the problem is really “people who do not understand the tax laws.”
Peter Reilly, Future Baseball Commissioner Tackles Tax Laws As Complex As Infield Fly Rule
Tough tax return choice for 2012: Pay more now to save later? My new post at IowaBiz.com, the Des Moines Business Record Blog for Entrepreneurs, discussing whether maximizing 2012 deductions is really a good idea.
Jason Dinesen, Taxpayer Identity Theft — Part 12 . More Kafkaesque obstacles to resolving an identity theft for his client.
William Perez, IRS Provides Further Disaster Relief for Hurricane Sandy
Kay Bell, Tax Carnival #112: Super Bowl of Taxes
Jim Maule, Tax Ignorance As Persistent as Death and Taxes
Missouri Tax Guy: Missouri does not mail Form 1099-G. You have to get it online. One more little blow to tax compliance for small taxpayers.
Trish McIntire, Low Cost Tax Preparation Options
TaxGrrrl, U.S. Postal Service To Eliminate Saturday Delivery: Will It Save Tax Dollars? Next they’ll shut down the Pony Express.
Patrick Temple-West, Waiting on the phone for the IRS, and more (Tax Break)
Ellen Kant, William McBride, Super Bowl Tax Bill (Tax Policy Blog)
Russ Fox, Will the Third Time be the Charm for Appeals? A case where the “independent” IRS appeals function failed twice.
Howard Gleckman, Can the Income Tax Fund the Government We Want? (TaxVox). I can’t speak for “we,” but it could easily cover all of the government I want.
The Critical Question: Et Tu, Sarkozy? (David Goulder, Tax.com)
If they can spell their address, tax cheating should be easy for them: Massapequa Restaurant Owners Sentenced for Tax Fraud (Massapequa Patch).
Isn’t that conspiracy? Tax fraud: We have a plan, authorities say (Myfoxtampabay.com)
Screwed either way. Taxpayer Sues IRS, Claims Agent Coerced Him Into Having Sex to Avoid Adverse Audit (TaxProf).
But not hotirsagent.com? I guess there really are stupid easy ways to earn internet money. A Kansan found one, but then got in trouble by not paying his taxes. KFDI.com reports:
Dallen Harris, 39, pleaded guilty to one count of tax evasion. He reported a taxable income of a little more than $164,000 in 2010, when it was actually more than $1 million.
Harris’ income came from Internet domain names, according to court ecords from a related civil forfeiture case in federal court. The government is seeking to forfeit Harris’ houses, cars and bank accounts in that case. The domain names included celebritysextape.tv, adultkingdom.net, Porntesters.com, hardcorefilms.tv, celebritynakedpic.com and sextape.com.
No, I won’t link to any of those. It doesn’t sound like they need any help generating traffic anyway.
Tags: alternative maximum tax, David Brunori, David Goulder, David Osterberg, Elizabeth Malm, Ellen Kant, Howard Gleckman, iowa tax policy, iowabiz.com, Iowans for Tax Relief, Jason Dinesen, Kay Bell, Linda Beale, maule, Missouri Tax Guy, Patrick Temple-West, Russ Fox, TaxGrrrl, TaxProf, The Critical Question, Tracy Gordon, Trish McIntire, William McBride, William Perez
Posted in Tax Roundup | No Comments »
Wednesday, January 30th, 2013 by Joe Kristan
Why so grumpy? Because it’s the first “official” day of tax season as the IRS begins processing returns. But only some of them. The last-minute Fiscal Cliff tax law is delaying the processing of many forms, delaying most business filings until “late February or into March.” They also have delayed processing of returns with education credits until sometime next month.
Oh, and the streets are a mess.
Kay Bell, Tax filing on hold for taxpayers who need 31 federal forms
TaxGrrrl, IRS Opens For Business Today, Many Taxpayers Qualify To File For Free
Taking your money to give to the well connected. From Taxing the Rich to Pay for Big Business Tax Credits by Veronique de Rugy:
Taking from the small businesses, giving to the big business with pull.
Brian Gongol on the decision of Senator Harkin to not seek an umpteenth U.S. Senate term:
Wouldn’t it be wonderful if we could start with a blank slate and ask ourselves (as Iowans): Who is the smartest, most dependable, most thoughtful person we could send to an august body of decision-makers who are challenged with bringing wisdom and sobriety to the decision-making process of government?
Like somebody like that would stand a chance.
Why bother with a state corporate income tax? While state income taxes are a reliable source of work for people like me, they do surprisingly little for the states, according to a new report released by the Tax Foundation yesterday. Nationwide state corporate income taxes accounted for only 3% of 2010 state revenues. In Iowa, it’s even lower. Here are the revenue sources from Iowa and some nearby states:
Source: Tax Foundation
The corporation income tax raises little revenue, is expensive to administer, is exploited by the well-connected and well lobbied, and is almost certainly a job-killer. Why not go for a low-rate, low-loophole system like The Tax Update’s Quick and Dirty Iowa Tax Reform Plan?
TaxProf, A Distributional Analysis of the Tax Systems in All 50 States, passing on a report from the Center on Budget and Policy Priorities says state tax systems are regressive. Keep this in mind:
Source: Heritage Foundation/
If you only look at the distribution of taxes paid and ignore the value of services and cash payments received, you miss a lot.
Janet Novack, IRS Tips Won’t Protect You From Identity Theft Tax Fraud.
Jack Townsend, Article on Importance of Jury Instructions in White Collar, including Tax, Crime Cases
Jason Dinesen, An Obligatory 1099-K Post for 2013
Trish McIntire, Before You Sign. A timely reminder that you are responsible for what’s on your return, even when you use a paid preparer.
Patrick Temple-West, Mickelson and the sports star migration, and more (Tax Break)
William McBride, CRS: Tax Rates Do Matter for Profit Shifting (Tax Policy Blog)
Joseph Thorndike, The Income Tax Is Inquisitorial — Get Over It. (Tax.com) May he have a good National Research Project exam in his future.
Robert Goulder, French Budget Minister Caught In Tax Probe (Tax.com)
That wouldn’t take much. Payroll Tax Cuts May Boost the Economy More than You Think (Howard Gleckman, TaxVox)
Bad news, good news: The Twinkie is Dead! Long Live the Twinkie! (Megan McArdle).
News you can use. Tax Law Warning: Don’t Cut Mom a Rent Break (Jim Maule)
Tags: CBPP, Gongol, Howard Gleckman, iowa tax policy, Jack Townsend, Janet Novack, Jason Dinesen, Joseph Thorndike, Kay Bell, maule, megan mcardle, Patrick Temple-West, Quick and Dirty Iowa Tax Reform Plan, Robert Goulder, state tax policy, tax administration, Tax Foundation, TaxGrrrl, Trish McIntire, Veronique De Rugy, William McBride
Posted in Tax Roundup | No Comments »
Tuesday, January 29th, 2013 by Joe Kristan
Flickr image courtesy Pasa47 under Creative Commons license
A Tax I can support! Tax the Revolving Door (Glenn Reynolds)
In short, I propose putting a 50% surtax — or maybe it should be 75%, I’m open to discussion — on the post-government earnings of government officials. So if you work at a cabinet level job and make $196,700 a year, and you leave for a job that pays a million a year, you’ll pay 50% of the difference — just over $400,000 — to the Treasury right off the top. So as not to be greedy, we’ll limit it to your first five years of post-government earnings; after that, you’ll just pay whatever standard income tax applies.
Plus make them wear clown clothes to work. (Via the TaxProf)
Allysia Finley, Mickelson and the Sports Star Tax Migration (Wall Street Journal):
About 3.5 million Californians have migrated to other states over the past two decades. Almost anywhere they chose to go would allow them to enjoy greater returns on their labor. Is it really surprising that athletes like Mr. Mickelson might be keeping an eye on the leaderboard?
It would be surprising if they didn’t.
Kyle Pomerleau and William McBride: EITC Awareness Day (Tax Policy Blog)
Research has shown that the EITC is associated with higher workforce participation among certain populations. However, Casey Mulligan’s research shows there is no free lunch here, since the EITC creates disincentives to work over the income range in which it phases out (roughly $20,000 to $50,000). And because the EITC is one of many overlapping anti-poverty programs, such as unemployment insurance, they all add up to huge disincentives to work among the poor.
And some Iowa politicians want to increase the Iowa EITC, making it a bigger poverty trap.
Steven Rosenthal, Chairman Camp Agrees: Too Many Choices Burden our Tax System (TaxVox)
Jeremy Scott, Huffington Post Draws Tenuous Link Between Camp Plan, Fix the Debt Group (Tax.com)
Robert D. Flach, GUIDELINES FOR TAX REFORM:
Recognize and acknowledge that the purpose of the federal income tax is to raise the money necessary for the administration of the government and government sponsored programs. It is not to be used to “redistribute income” or as a method for delivery of social welfare and other government benefits.
If that principal were vigorously applied to the tax law, the 1040 would fit on a postcard.
Climb in the Cavalcade! Worker’s Comp Insider hosts the latest Cavalcade of Risk roundup of insurance and risk-management posts, including Insureblog on the Curly Bulb Menace.
Russ Fox, Form 8863 Added to Returns that the IRS Won’t Accept Just Yet. The form for tuition credits.
William Perez, When Can You Begin Filing Your 2012 Federal Tax Return?
Jason Dinesen, Taxpayer Identity Theft, Part 11. In which the IRS ignores the change-of-address filing and mails a long-delayed refund to the wrong address.
Martin Sullivan, Taxing Financial Pollution. On the futility of a financial transactions tax. (Tax.com)
Missouri Tax Guy, What you’ll Need. A guide to gathering your tax return information.
TaxGrrrl, Tax Season Kicks Off January 30th: Here’s What’s On Tap
Jack Townsend, IRS Issues John Doe Summons to UBS (All Over Again)
Kay Bell, Deducting sales tax on your new car … or boat or airplane or home
Tags: Allysia Finley, Beavers, cavalcade of risk, Instapundit, Jack Townsend, Jason Dinesen, Jeremy Scott, Kay Bell, Kyle Pommerleau, Martin Sullivan, Missouri Tax Guy, Phil Mickelson, Robert D Flach, Russ Fox, Steven Rosenthal, tax crime, TaxGrrrl, TaxProf, William McBride, William Perez
Posted in Tax Roundup | No Comments »
Wednesday, January 23rd, 2013 by Joe Kristan
The IRS has turned off its preparer registration initiative following the federal court decision enjoining the program. The Service issued this statement yesterday:
As of Friday, Jan. 18, 2013, the United States District Court for the District of Columbia has enjoined the Internal Revenue Service from enforcing the regulatory requirements for registered tax return preparers. In accordance with this order, tax return preparers covered by this program are not currently required to register with the IRS, to complete competency testing or secure continuing education. The ruling does not affect the regulatory practice requirements for CPAs, attorneys, enrolled agents, enrolled retirement plan agents or enrolled actuaries.
The Internal Revenue Service, working with the Department of Justice, continues to have confidence in the scope of its authority to administer this program. It is considering how best to address the court’s order and will take further action shortly. Please continue to check this site as additional information becomes available.
The second paragraph is the most interesting. While the IRS doesn’t admit that it overreached, this is far short of a vow to fight to the last appeals brief. One can only hope they will reconsider the whole misbegotten regulatory scheme.
Meanwhile, Accounting Today confirms reports the IRS has shut down the PTIN registration system and the Registered Tax Return Preparer testing program. They report the PTIN system is expected to come online again after the RTRP registration system is removed from it. Meanwhile, the Return Preparer Office has apparently turned off its phones.
All of this makes me believe that the IRS is not seeking any emergency stay of Friday’s decision and is planning to do without the RTRP rules for this season, anyway.
TaxGrrrl posts a great interview with the winning attorney in the preparer regulation decision, Dan Alban. She encounters a new perspective on whether regulation actually does more good than harm (my emphasis?:
Finally, with all of the legal niceties out of the way, I asked Alban the really tough questions: What about all of those folks who say that regulation is a good thing? What does this ruling mean for taxpayers? And why would you embrace a scheme that wouldn’t require – at a very basic level – some semblance of regulation to ensure that preparers are competent?
Alban didn’t hesitate. Intent, he says, is key. The intent of any kind of licensing scheme should be to protect the consumer. But Alban, who focuses on a occupational licensing in his practice, noted that frequently, these kinds of laws instead protect established interests from competition. That is, he says, not in the best interest of the consumer.
And with that, I paused. You see, in all of the years that I’ve been writing this blog, I’ve only received a phone call from IRS complaining about a post once. And it was for this one. The IRS wanted to assure me that the exemptions had nothing to do with any special interests. None. Not a whit. Interestingly, many preparers at smaller firms thought differently. I received a number of supportive emails and “off the record” comments about how the new rules felt discriminatory.
Bingo. Regulation always favors the big. It’s no big deal for H&R Block headquarters staff to deal with regulations for all of its franchises. It’s a different story for small operators like Sabina Loving, the solo preparer in a low-income South Side Chicago neighborhood who was lead plaintiff in last week’s decision.
It would appear that attorneys benefited disproportionately from the regulations; as a point of context, the American Bar Association (ABA) has encouraged the regulation of “other” preparers for years. Why is that? Is there maybe something to Alban’s idea that these kinds of laws protect established interests from competition?
And then Alban said something else that struck me: about fifty years ago, only 1 in 20 workers in the U.S. needed government permission (in the way of regulations) to earn a living. Today, that number is 1 in 3. That, he said, is troubling. We are increasingly relying on the government to decide who is qualified to perform services for us. Is that something we want? Does regulation really make someone competent? Or honest?
No, it just gives them one more way to control things.
Russ Fox: Alphabet Soup
Trish McIntire, Voluntary Licensing?
Paying taxes with cell phone money? The Iowa Department of Revenue yesterday announced a venture with Dwolla to enable taxpayers to pay taxes with Dwolla’s mobile device online payment technology. The Des Moines Register Reports:
Dwolla is a cash-based payment network that provides real-time, low-cost, online and mobile payments, officials said. Instead of charging a floating percentage and fixed fee per transaction for goods and services or dealing with administrative issues of checks, Dwolla’s network costs a flat 25-cent fee on any payment over $10, and it’s free for transactions under $10.
…
Iowa Department of Revenue Director Courtney Decker said the state’s first use of Dwolla will allow businesses that already pay more than $100 million in cigarette stamp taxes the option of using the Dwolla network. She added, “This is just the tip of the iceberg” in terms of Dwolla’s potential in state government.
Dwolla’s service is cheaper and safer than mailing and processing a paper check, Decker said, and it will allow participating businesses to receive their tax stamps more quickly. She added that 89 percent of Iowa individual income taxes are filed electronically, but the percentage of people paying taxes electronically to her department is far lower.
Paying online now requires a slow application process and analog mail delivery to receive permission to make electronic payments. The Dwolla system will be a big improvement if the Department enables it for individual income taxes.
IRS wins another demutualization case. The IRS continues to fight the to tax proceeds on the demutualization of insurance companies. They famously lost the Fisherdecision, which held that taxpayers could treat their payments for insurance premiums as basis when they received shares of stock in an insurance company changing from mutual ownership to a stock company. But earlier this month the IRS won a Federal District Court Decision in California rejecting the Fisher“open transaction” scheme. If the IRS wins on appeal, this will likely end up settled by the Supreme Court. This is the second IRS victory since the Fisher decision.
Cite: Reuben, DC CACD, CV 11-09448
Roger McEowen, Two Important Tax Developments:
On January 18, two key tax developments occurred. First, a federal district court wiped out the IRS preparer regulations. Later, IRS announced that farmers aren’t stuck with the March 1 deadline and can file timely by April 15.
David Brunori, Jindal’s Bold Move (Tax.com):
Republican Louisiana Governor Bobby Jindal has made the most provocative tax reform recommendation in many years. Jindal said he was going to overhaul the tax law. If he has his way, he will revolutionize it.
Pay attention, Governor Branstad.
Donald Marron, Five Key Facts about the House Debt Limit Bill (Tax Vox)
Howard Gleckman, How Obama’s Inaugural Address Frames the Policy Debate for the Next Decade (TaxVox). I don’t think so.
Kay Bell, Tax Carnival #111: Countdown to Filing. It’s Kay’s roundup of tax tax-related posts from all over.
Jack Townsend, Steps in OVDI/P Processing and Opting Out. Dealing with the IRS when you have an undisclosed offshore account.
Jason Dinesen, Home Office Deduction: IRS Offers a Simplified Calculation Option, But the Qualifying Rules Haven’t Changed
Patrick Temple-West, Private equity tax breaks in jeopardy, and more (Tax Break)
William McBride, Phil Mickelson’s Tax Rate
Robert D. Flach is Buzzing! He also has posted What to Give Your Tax Preparer at Mainstreet.com.
Jim Maule, Tax Ignorance and Its Siblings. “Tax ignorance, of course, is but one part of political ignorance, as I explored in When Tax Ignorance Meets Political Ignorance.” Yet the good professor insists that 50% + 1 voting by ignorant voters works better than trusting individual decisions in the marketplace.
News you can use: Life After Big 4: What You May Miss and Won’t Miss At All (Going Concern). I don’t miss it one tiny bit.
Tags: Dan Alban, David Brunori, Demutualizaton, Donald Marron., Dwolla, Fisher, Going Concern, Howard Gleckman, Jack Townsend, Jason Dinesen, Kay Bell, maule, Patrick Temple-West, preparer regulation, Robert D Flach, Roger McEowen, RTRP, Russ Fox, TaxGrrrl, Trish McIntire, William McBride
Posted in Tax Roundup | 1 Comment »
Thursday, January 17th, 2013 by Joe Kristan
Alternative Maximum Tax introduced in Iowa House. The Republican leadership of the Iowa House of Representatives has introduced a new way to compute Iowa personal income tax. HF 3 would create an optional ”alternative base income tax”at a 4.5% flat rate. The bill would allow taxpayers to elect to be taxed on their federal Adjusted Gross Income before net operating losses, less a $6,200 standard deduction ($12,400 for joint filers and heads of households). The only credits allowed would be for estimated taxes and withholding. Taxpayers could instead continue to follow the existing tax law.
There is an obvious flaw in the statute as drafted: federal AGI includes interest on federal debt, which states aren’t allowed to tax. Maybe that’s just assumed, but the existing Iowa income tax law specifically excludes U.S. interest. This tax is different from that proposed by Iowans for Discounted Taxes, which would exempt all investment income from the tax base.
The bill would be a huge step forward for Iowa tax policy if it were enacted as a replacement for Iowa’s current tax, rather than an option. Eliminating all of the tax credits and special state deductions would greatly simplify everyone’s tax life, and lowering the rate would make Iowa much more attractive to businesses and newcomers. In this form, though, it’s just another computation, an alternative maximum tax. It’s like the alternative minimum tax, except you pay the lower tax computed, rather than the higher one. It was probably drafted this way to avoid a fight over eliminating the current deduction for federal income taxes on Iowa returns.
I will run some numbers to see how the HF 3 tax would compare with taxes computed the current way. The bill is co-sponsored by 54 representatives, including House Speaker Paulsen, so it’s a given that it will pass the House in some form. It will be interesting to see whether the Senate, controlled by Democrats, will bring this to a vote. The Governor has made clear income tax reform isn’t his priority this year.
This plan might be half-cocked. From William McBride at the Tax Policy Blog:
This week Rep. Rosa DeLauro (D-CT) proposed an assault weapon buy-back program that would operate through the tax code:
“The SAFER Streets Act creates a $2,000 refundable tax credit ($1,000 for two consecutive years) for an assault weapon owner who turns in their firearm to the state police.”
…
This assumes the gun manufacturers cannot produce additional guns as
fast as the old ones are destroyed, and that they cannot be produced, at
this rate of production, cheaper than the buy-back price.
Cash for Clunkers, firearms edition.
Kay Bell, Guns, ammo, violence and taxes
TaxProf, TIGTA: IRS Has 60% Error Rate in Policing Noncash Charitable Contribution Deduction. I’m sure they’ll do lots better implementing the Affordable Care Act.
Patrick Temple-West, New Yorkers face higher real estate taxes, and more
Peter Reilly, Are Tax Protesters Actually Winning ?:
Ms. Curtis lost as badly as it is possible to lose in Tax Court. There is the 75% fraud penalty and the maximum sanction, $25,000, for frivolous arguments. She still might appeal, though. Presumably the Circuit will make relatively quick work of that and maybe pile on some more sanctions. Fine. Now the IRS has to start trying to collect from her.
Tax protester arguments can slow down the tax collector, but the tax man wins in the end.
Robert D. Flach, THE RETURN OF A HOME OFFICE STANDARD DEDUCTION
Kerry Kerstetter, New option for Home Office deduction
Jason Dinesen, How the Fiscal Cliff Deal Affects Teachers
Trish McIntire, Red Forms
Cara Griffith, Should States Just Enforce Use Tax Collection? (Tax.com)
Russ Fox, California Supreme Court Takes Gillette Case
Joseph Henchman, The Al Bundy Tax Rule: New Hampshire Governor Pledges to Veto Beer Tax (Tax.com)
If it’s your identity, pretty bad. IDENTITY THEFT AND TAX FRAUD – HOW BAD IS IT? (TaxTV.com)
Brian Mahany, Steelers’ Plaxico Burress Pays Off $98,000 IRS Tax Lien
Christopher Bergin, Everybody’s Gone Surfing (Tax.com)
News you can use: Going Concern’s Guide to a Healthy Busy Season: Because No One Should Die at Work
Tags: alternative maximum tax, Branstad tax policy, Brian Mahany, Cara Griffith, Christopher Bergin, Going Concern, Jason Dinesen, Joseph Henchman, Kay Bell, Kerry Kerstetter, Patrick Temple-West, Peter Reilly, Robert D Flach, Russ Fox, TaxProf, TaxTV, Trish McIntire, William McBride
Posted in Eye on the Legislature 2013, Tax Roundup | 1 Comment »
Joe Kristan writes the Tax Update items, and any opinions expressed or implied are not necessarily shared by anyone else at Roth & Company, P.C. Address questions or comments on Tax Updates to
