Posts Tagged ‘William Perez’

Tax Roundup, 4/1/16: No fooling. Taxpayer litigates $3.48. “At least!”

Friday, April 1st, 2016 by Joe Kristan

Accounting Today Visitors: Click here for the laundry appraisal discussion.

 

Worth litigating!

Worth litigating!

It’s the principle of the thing. Well, technically, it’s the interest. Texas is known for big things. A taxpayer from Texas made a big thing in Tax Court out of a very small thing in a decision released yesterday. Judge Goeke explains (my emphasis):

The parties have largely settled the disputed interest, but, as we interpret her position, petitioner continues to assert that she is entitled to interest on $87.08 for at least one year.

That’s not even “she is entitled to 87.08.” It’s “interest on $87.08 for at least one year.” Let’s do the math.

At the current IRS overpayment rate of 4%, the taxpayer insisted the Tax Court resolve a dispute over $3.48. At least.

It didn’t go well:

One might find a dispute of such a small amount trivial, but petitioner is very earnest. Nevertheless, for various reasons petitioner’s claim is not properly remedied by abatement of interest, as we will explain.

No word on whether an appeal is in the works.

The Moral? Sometimes a molehill is just a molehill. Even in Texas.

Cite: Kappos, T.C. Memo. 2016-59

 

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Russ Fox begins the Bozo Tax Tip countdown with Bozo Tax Tip #10: Email Your Social Security Number! “Seriously, use common sense! Would you post your social security number on a billboard? That’s what you’re doing when you email your social security number.”

Paul Nieffer, When to Take “Extra” Investment Interest? “I see many more farmers now with investment brokerage accounts.  Some of these farmers have borrowed against these accounts and the margin interest paid is considered investment interest and the tax deduction may be limited.”

William Perez, IRS Launches Contest to Design Futuristic Online Service. “‘The goal of this challenge,’ according to details found at the Tax Design Challenge page at Challenge.gov, ‘is to reimagine the taxpayer experience and design the taxpayer experience of the future.'”

Kristine Tidgren, What’s Been Happening at the Iowa Legislature? (AgDocket). Turtles are involved.

Annette Nellen,2015 Tax Legislation Changes – Lots of Them! “In 2015, over 15 federal laws were enacted, making over 150 changes to the federal tax laws!”

Keith Fogg, When is the Statutory Notice of Deficiency Issued by an Authorized Delegate of the Treasury Secretary (Procedurally Taxing). “What is somewhat remarkable about the remand is that it appears Mr. Muncy made tax protestor type arguments yet convinced the 8thCircuit to issue the remand.”

Jason Dinesen, Taxation of Incentives Received from a Bank. “You open a savings account at a bank and they give you a toaster or a cooler or a coffee cup as a gift. Is this taxable?”

TaxGrrrl, Man Found Guilty Of Selling Stolen Patient Info Used To File False Tax Returns.

No, that about covers it. Win Powerball Lottery, Get Sued, Go Bankrupt, Any Questions?  (Robert Wood)

 

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Kyle Pomerleau, How Would the Presidential Candidates’ Tax Plans Impact Capital Gains? (Tax Policy Blog):

For those taxpayers over $250,000, capital gains would be treated as ordinary income. Since ordinary income tax rate go up under the Sanders plan, the tax rate on capital gains for those earning over $250,000 would go up by a lot. The top marginal tax rate on capital gains would go up from 23.8 percent to 54.2 percent. This is a much higher rate than what we have seen in the United States on capital gains in the past and combined with state and local taxes on capital gains, would make our rate the highest in the developed world.

But think of all the oool free stuff!

 

Howard Gleckman, Note to Federal Tax Reformers: Don’t Forget the States (TaxVox). “Eliminating tax preferences would also wipe out the federal deduction for state and local taxes, a step that could increase voter pressure on states to lower their taxes.”

TaxProf, The IRS Scandal, Day 1058. More on Lois Lerner’s links with the Kafka-esque “John Doe” proceedings in Wisconsin.

 

Kay Bell, Letter from Trump lawyers confirms IRS audits. “Also provides GOP presidential front-runner a legal excuse for not releasing tax returns.” I think Kay misspelled “lame.”

A correspondent suggests that the taxpayer confidentiality rules be amended to allow anyone to access presidential candidate tax returns. I agree. I would further require that all candidates — and all elected federal officials — be required to prepare their returns in a live (and then archived) webcast, with a running comment bar to enable us all to “help.” Ideally, they would have to do it by hand, Robert D. Flach style.
News from the Profession. Texas Accountant Emerges as Early Contender for 2016’s Worst Person (Caleb Newquist, Going Concern). “Specifically, Harris allegedly instructed nurses to give hospice patients overdoses of medications like morphine to hasten their deaths.”

 

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Tax Roundup, 3/30/16: IRA blows up after investing in closely-held business. And: S corporation loan basis!

Wednesday, March 30th, 2016 by Joe Kristan


No Walnut STAnother IRA-owned business disaster. 
We’ve noted the dangers of using your IRA as the owner of your closely-held business. A Tax Court Case yesterday illustrates the dangers.

The married taxpayers rolled over funds from their retirement plans to IRAs, and then used them to fund a new corporation, which in turn bought the assets of another corporation. Part of the purchase was debt-funded, and the couple guaranteed the loan.

Tax Court Judge Marvel found that a prohibited transaction resulted, disqualifying the IRA and triggering a $180,000 deficiency:

In closing, petitioners’ participation in the prohibited transactions on or about June 18, 2003, caused petitioners’ IRAs to cease to be IRAs as of the first day of petitioners’ taxable year in which the prohibited transactions occurred. See sec. 408(e)(2)(A). Furthermore, petitioners are deemed to have received distributions on that first day of amounts equaling the fair market values (on the first day) of the assets in petitioners’ IRAs as of that first day… We also hold that petitioners are liable for the 10% additional tax set forth in section 72(t)(1) with respect to the $432,076.41, because neither petitioner was 59-1/2 years of age or older during 2003.

Using your IRA to fund your business is playing with fire.

Cite: Thiessen, 146 T.C. No. 7

 

BitcoinHow loans to your S corporation can give you basisWe talked yesterday about how S corporation stock basis can enable stockholders to deduct losses. Even if you are out of stock basis, the stockholders might still be able to take a loss — if they have loaned money to the S corporation.

This comes up most often with multiple owner S corporations. You might have one owner who can’t fund capital contributions, or who is passive and can’t use more losses. The other owner might still want to deduct his share of losses; that owner can loan money to the corporation and get a deductible loss.

There are drawbacks. If you repay the loan before the S corporation has earned back the deducted loss, the repayment will trigger taxable income.

EXAMPLE: Joe is an owner of Joebwan Inc., an S corporation. He is out of stock basis at the end of 2015, so he loans the company $30,000 in December 2015 to enable him to deduct his $25,000 share of corporate losses on his 1040. That leaves him $5,000 basis in his loan.

In January 2016, a customer pays an overdue bill, enabling Joebwan Inc. to pay back the $30,000 advance. The company breaks even in 2016.

Unfortunately for Joe, he has $25,000 gain on the repayment in January 2016; because the corporation had no taxable income, Joe’s basis wasn’t restored before repayment.

Making a new loan at the end of 2016 doesn’t fix this result. Only income does. If Joe’s share of 2016 income had been $30,000, it would have restored the entire $25,000 loss to his loan basis, and he would have had no gain.

Some things to know about debt basis:

-Only loans directly to the corporation from the shareholder work; debt guarantees do not provide S corporation basis.

-If there is gain on the loan repayment, the income is capital gain if the loan is documented with a note; the gain is ordinary if it is for “open account” debt, where no note documents the loan terms.

Complex rules govern “open account” debt repayments, causing taxable gain in unexpected situations.

This is another of our irregular series of 2016 filing season tips, running through the April 18 filing deadline.

 

20120906-1Taxing you to lure and subsidize your competitors. Mason City pork plant snags $15M in state incentives (Donnelle Eller, Des Moines Register):

A proposed $240 million pork processing plant in Mason City received approval for nearly $15 million in state incentives.

The Iowa Economic Development  Authority Board Tuesday agreed to provide Prestage Foods of Iowa nearly $11.5 million in tax incentives, plus $3.3 million in job-training assistance.

It may shock you to know that Iowa already has pork packing plants, ones that opened without getting “nearly $15 million in state incentives.” I’m sure they are thrilled to see their taxes go to fund a competitor.

 

Paul Neiffer, Danger, Will Robinson. Paul explains how a $1 difference income can trigger thousands of dollars of taxes. For health!

Jason Dinesen, Beware of the Deadlines on Amended Tax Returns.

Robert Wood, CEO Faces 5 Years For Spending $6.8M Withheld IRS Employment Taxes. And he still has to find $6.8 million to repay the IRS.

William Perez, Reviews of 18 Tax Preparation Software Programs

Kay Bell, Film industry’s willingness to sacrifice tax breaks helps defeat Georgia’s anti-gay marriage law. They would have taken some other state’s tax breaks instead, those noble filmmakers.

Keith Fogg, The Eleventh Circuit Requires IRS to Hold a Hearing Prior to Making a Trust Fund Recovery Penalty Assessment if Proposed Responsible Officer Makes Timely Request (Procedurally Taxing).

TaxGrrrl, IRS Encourages Taxpayers To Check Refund Status Online (Millions Already Have)

 

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Howard Gleckman, Cruz and Trump Would Slash Taxes on New Business Investment, But Cruz Would Cut Them More (TaxVox).

TaxProf, The IRS Scandal, Day 1056

 

Career Corner. That Time an Accounting Firm Recruiter Told Me That My Personality Sucked (Leona May, Going Concern). Reminds me of the time the first guy at the job interview spray-painted an “X” on the back of my jacket.

 

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Tax Roundup, 3/23/16: “Section 6103 was enacted to protect taxpayers from the IRS, not the IRS from taxpayers.” And more!

Wednesday, March 23rd, 2016 by Joe Kristan

norcal logoNo Scandal here. The IRS has long history of hiding behind taxpayer confidentiality rules to avoid accountability. The Sixth Circuit Court of Appeals called the IRS on this yesterday in a harshly-worded opinion.

The case arose from the Tea Party scandal. NorCal Tea Party Patriots sued the IRS after the scandal emerged. The IRS has used every trick in the book to drag out the case, citing the “confidentiality” of the very taxpayers it abused. From the Sixth Circuit opinion (my emphasis):

The IRS argues that the “names and other identifying information of” organizations that apply for tax-exempt status — along with the applications themselves — are confidential “return information” under 26 U.S.C. § 6103. IRS Petition at 2, 16. The IRS argues further that the district court lacked authority to order disclosure of those names under a statutory provision for disclosure in judicial proceedings where “the treatment of an item reflected on such return is directly related to the resolution of an issue in the proceeding[.]” 26 U.S.C. § 6103(h)(4)(B). The IRS contends that the district court’s discovery orders threaten to undermine statutory protections for taxpayer privacy, and that a writ of mandamus is therefore appropriate.

A “writ of mandamus” is “an extraordinary remedy reserved to correct only the clearest abuses of power by a district court.” The Sixth Circuit wasn’t buying. They reviewed the IRS foot-dragging:

To that end, the plaintiffs sought discovery in the form of basic information relevant to class certification, including the names of IRS employees who reviewed the groups’ applications for tax-exempt status and the number of applications from similar groups that had been granted, denied, withdrawn, or were still pending. On the record before us here, the IRS’s response has been one of continuous resistance. For example, the IRS asserted that the names of IRS employees who worked on the groups’ applications were taxpayer “return information” protected from disclosure by § 6103. The IRS eventually abandoned that position, but argued instead that § 6103 barred the Department of Justice’s attorneys from even reviewing the groups’ application files to find the names of the IRS employees who worked on them. That was true, the IRS asserted, even though § 6103(h)(2) — entitled “Department of Justice” — expressly allows the Department’s attorneys to review a taxpayer’s return information to the extent the taxpayer “is or may be a party to” a judicial proceeding. See 26 U.S.C. § 6103(h)(2)(A). The IRS further objected — this, in a case where the IRS forced the lead plaintiff to produce 3,000 pages of what the Inspector General called “unnecessary information” — that “it would be unduly burdensome” for the IRS to collect the names of the employees who worked on the groups’ applications. The district court eventually intervened and declared the IRS’s objections meritless. Yet the IRS objected to still other document requests on grounds of “the deliberative process privilege[.]” That privilege, the IRS acknowledged, can be waived in cases involving “government misconduct”; but in the IRS’s reading, the IG’s report “does not include any allegation or finding of misconduct.”

Many taxpayers and preparers wish the IRS would use such a generous definition of “misconduct” when the criminal agents come calling.

The Sixth Circuit rejected all of the IRS arguments:

Section 6103 was enacted to protect taxpayers from the IRS, not the IRS from taxpayers.

Words that should be chiseled over the entrance to IRS headquarters.

Cite: United States v. NorCal Tea Party Patriots et al.; CA-6, No. 15-3793.

More coverage:

TaxProf, IRS Scandal, Day 1049:  6th Circuit Slams IRS Treatment Of Tea Party Group

Russ Fox, A Bad Day for the IRS in Court

 

Scott Drenkard,New Study on Electronic Cigarettes Released Today (Tax Policy Blog):

To some, vapor products are an exciting innovation that offers a new, less harmful alternative to traditional incinerated cigarette use. By contrast, tobacco control groups are concerned about youth use of the products.

Meanwhile, politicians are concerned about losing their sweet tobacco revenues if people stop gassing themselves with the real thing. Hence the moral panic.

This map is in the study:

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“Vapor products are generally found to have a much lower risk profile than traditional incinerated cigarettes.”

 

Paul Neiffer, Expanded Cost Basis Reporting is Here! Are you Ready? “The Surface Transportation and Veterans Health Care Improvement Act of 2015 (those two don’t really go together) added new tax laws that require executors to file cost basis information with the IRS.  This is required only when there is a taxable estate.”

Kay Bell, IRS releases Top 10 identity theft, tax fraud cases. 2015 only. 

Jack Townsend, IRS Publicizes Success in Prosecuting Identity Theft Refund Fraud

The IRS’s message from the selected 10 examples is that identify theft is serious and draws serious sentencings, with the principals involved receiving over 70 months (some well in excess of 100 months) incarceration (persons with lesser roles receive lesser, but still significant sentences).

That’s appropriate, but it’s not enough. Even though the thieves highlighted by the IRS report will rot for a long time, the millions they have stolen aren’t coming back. The petty grifters hightlighted in the report are probably not the type of folks who carefully weigh consequences when they can get free money right now. Nor will long sentences aren’t going to bother Russian organized crime networks, who have no intention, and little prospect, of facing U.S. justice.

Improved IRS processes that stop the crimes before they happen are what’s needed.

 

William Perez, How Much Can You Deduct by Contributing to a Traditional IRA? “Updated for 2016 contribution limits.”

Leslie Book, Filing a Day Late Can Be Timely Under Tax Court E-Filing Rules and So is Filing an Income Tax Return Ten Days Later After E-File Rejection. Good to know.

Robert Wood, Does Extending April 15 Deadline Increase Odds Of IRS Audit?. “It is worth saying it again: there is no increased audit risk to going on extension.” But there is definitely an increased risk if you mess up a return by doing it hastily, or by leaving off a late-arriving K-1.

Tony Nitti, Tax Geek Tuesday: Death Or Retirement Of A Partner In A Partnership. “Importantly, when a partner’s interest is to be liquidated by a series of distributions, the interest will not be considered liquidated until the final distribution has been made.”

 

TaxGrrrl, How To Survive Tax Season (Or Any Busy Work Day) In 10 Easy Steps.

Peter Reilly, IRS Bounty Hunters Should Not Waste Time On FBAR Penalties. In too many cases, that’s true of the IRS too.

 

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Donald Marron, Britain Builds a Better Soda Tax (TaxVox). Better at stupid is still stupid.

Annette Nellen, Taxing Candy and Snacks – That’s a Good Start. At meddling in places where the government has no business.

 

Career CornerAccounting Talent Demanding Everything Shy of the Moon, Your First Born (Caleb Newquist, Going Concern). “If I may speak for myself and many, many other people, I’d be “history” after a few days of being treated like family. The nagging questions, the guilt, the constant phone calls, the passive aggressive suggestions about marriage/kids/life direction/bad habits.”

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Tax Roundup, 3/16/16: Coupling heads to the Governor. And: Trainwrecks, brackets, and that dreaded DNA!

Wednesday, March 16th, 2016 by Joe Kristan

coupling20160213Almost Coupled. Both houses of the Iowa General Assembly passed the bill to couple the Iowa tax law to federal tax law for 2015, with the exception of bonus depreciation (HF 2433). The House of Representatives vote was overwhelming, and the Senate was unanimous.

The debates before the votes featured complaints about how school funding is suffering because businesses get the same Section 179 deduction on their Iowa returns as on their federal returns. Yet not one school-funder mentioned any other ideas about finding additional $97.6 million funding lost to the Fiscal 2016 budget. For example:

Iowa credits fy 2017

So apparently school kids are important, but less so than, say, the Geothermal Heat Pump tax credit. (Related: What Iowa considers more important than Sec. 179.)

The bill also repeals the manufacturing supplies sales tax rule set forth by the Department of Revenue that was set to take effect in July. It replaced it with the manufacturing supplies tax exemption passed by the house in 2014, only to die in the Iowa Senate.

In addition to Section 179 coupling, the bill also allows on Iowa 1040s a number of other provisions enacted by Congress in December, including:

Exclusion for IRA contributions to charity
Exclusion of gain from qualified small business stock
Basis adjustment for S corporation charitable contributions
Built-in gain tax five-year recognition period
$250 above-the-line educator expense deduction
Exclusion of home mortgage debt forgiveness
Qualified tuition deduction
Optional sales tax deduction
Conservation easement deductions
Deduction for food inventory contributions

The Des Moines Register coverage of yesterday’s votes makes it appear that the Governor is on board, though he hasn’t said so in so many words. It quotes spokesman Ben Hammes:

“As the chief executive, it is the governor’s job to look at how this bill fits into the bigger budget picture and how it will impact jobs and Iowa taxpayers and he will review it accordingly. The governor is pleased that the Legislature was able to come together and find resolution on these key issues,” Hammes said.

So he doesn’t exactly say he’ll sign. I think he will, but I will feel better when he does.

Unfortunately, the bill only applies to 2015, so we have to do it all again next year.

 

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Hank Stern, More (bad) trainwreck news (InsureBlog):

As we mentioned at the end of January, Open Enrollment v3.0 was pretty much doomed from the start:

“About 6 million people have signed up for health coverage that will take effect on Jan. 1 in the states that use the [404Care].gov enrollment.”

That was way off the (implausibly) predicted 21 million anticipated to sign up. But it’s also only part of the story…

It’s not affordable, and they don’t care.

 

Mitch Maahs, Tax Brackets: Revisiting the Tax on Gambling Winnings just in Time for the NCAA Tourney (Davis Brown Tax Law Blog). “Note however that losses may only be deducted to offset gambling winnings, and are only deductible up to the amount of winnings for the year.”

William Perez, New Rules for Deducting Repairs and Maintenance. “The IRS increased the threshold for deducting repairs and maintenance expenses under the safe harbor election from $500 to $2,500.”

TaxGrrrl, FBAR, FATCA Filings Top 1 Million As IRS Increases Scrutiny On Foreign Accounts. “The penalties for noncompliance may, under the law, result in civil penalties, criminal penalties or both: the list of potential penalties that may apply is distressingly long. It’s all very draconian but it’s also very real.”

 

Jack Townsend, Tax Court Holds FBAR Penalty Collected Is Not in the $2,000,000 Threshold for Whistleblower Award under § 7623(b)

Jason Dinesen, What is a 501(c)(3) and What’s the Big Deal? “First of all, the terms not-for-profit and tax-exempt are not interchangeable.”

A. Levar Taylor, Update On The “Late Return” Dischargeability Litigation: 9th Circuit To Hold Oral Argument in Smith Case (Procedurally Taxing)

Robert Wood, What To Provide When IRS Requests Documents

 

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Caleb Newquist, That Time One of Donald Trump’s Companies Got in Trouble for Reporting Ludicrously Deceptive Non-GAAP Results (Going Concern).

TaxProf, The IRS Scandal, Day 1042. Timely thoughts of what happens when the power to abuse taxpayers goes to a new abuser-in-chief.

David Brunori, Immigrants Continue to Be Good for Us (Tax Analysts Blog). “In a report, the Institute on Taxation and Economic Policy says immigrants who entered the country illegally paid roughly $11.6 billion in state and local taxes in 2013.”

Renu Zaretsky, Budget Battles Continue. Today’s TaxVox headline roundup covers federal proposed budget and Pennsylvania’s no budget, among other news.

 

If you are perplexed by voter choices this year, this may help explain things. 80% of Americans Support Mandatory Labels on “Food Containing DNA” (Ilya Somin)

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Tax Roundup, 3/15/16: Deadline Day, Coupling Vote Day. And: Arnold Palmer’s worst golf partner goes to Tax Court. (Updates)

Tuesday, March 15th, 2016 by Joe Kristan

coupling20160129Coupling day in the General Assembly. The bills to couple Iowa’s 2015 tax law with federal 2015 tax changes (HF 2433 and SF 2303) are scheduled for debate today in the Iowa House and Senate. I expect them to pass easily. The Governor is on vacation in Florida, but GlobeGazette.com reports that he “is expected to return to Iowa later this week” and sign the bill. We will update this post if and when the votes come down.

Update, 3:40 p.m.: The Senate passes the House bill without amendment, 50-0. On to the Governor.

Update, 1:09 p.m.: A glitch? The Iowa Society of CPAs twitter feed reports:

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I know nothing more, but if they approve an amended version, it has to go back to the House for a re-vote. I’ll monitor and update if I learn more.

Update, 10:26 am: coupling bill HF 2433 passes Iowa House, 78-17. On to Senate later today.

 

Deadline day! Corporation returns are due today. Also due are two key international tax forms, for trusts and withholding on interest, dividend and other non-business income paid to foreign taxpayers. Russ Fox has more on that.

e-file logoTake care to document that you are filing your returns or extensions timely. E-file is best if you can, as you have no worries about mail truck mishaps. If you file on paper, Certified Mail, Return Receipt Requested, is the tried-and-true way to prove you filed your returns on time.

If you don’t get to the post office on time, you can file up until midnight at the UPS Store or Fed-ex store, but be careful. Make sure you use one of the IRS-approved shipping services (for example, UPS Ground doesn’t qualify, but “Next-Day Air does). Make sure that you shipping slip has a pre-midnight time stamp. And you have to use the street addresses of the IRS service centers, rather than their P.O. boxes.

Related: William Perez, How to Mail Tax Returns to the Internal Revenue Service

 

(also see [1]). Direct image URL [2], Public Domain, https://commons.wikimedia.org/w/index.php?curid=2199960

By U.S. Coast Guard – U.S. Coast Guard historical photo

Worst Golf Partner Ever. Arnold Palmer, the famous golfer, did less well in the auto business, thanks to a partner involved in a Tax Court case released yesterday. The companies, BOH and APAG, were funded in part by Mr. Palmer. Judge Nega sets the stage:

Petitioner began siphoning money from Arnold Palmer Motors, Inc., as early as October 1985. When one dealership ran short on cash, petitioner transferred money from another dealership to cover the shortfall. Rather than transferring funds directly between dealership accounts, petitioner routed transfers through his personal bank account. Petitioner routinely kept some of the transferred funds in his own account instead of transferring them to the appropriate dealership. Messrs. Palmer and McCormack did not authorize petitioner to take money from the dealerships.

The bad partner diversified into stealing from other S corporations funded by Mr. Palmer and others, but in which he held a 1/3 interest. After some time he was caught, and the tax man came calling.

The taxpayer took a bold tax return position. You need basis in an S corporation to take losses. Loans you make to an S corporation can create basis for taking losses. The taxpayer said that he made loans to the corporations he was stealing from, giving him basis.

The Tax Court found this improbable (my emphasis):

The record contains no evidence reliably establishing petitioners’ bases, if any, in the Arnold Palmer dealerships or their entitlement to NOLs arising therefrom. Petitioners have not provided any Forms 1120S, U.S. Income Tax Return for an S Corporation, or Forms 1065, Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc., for any of the Arnold Palmer dealerships in which petitioner was a one-third shareholder. They contend that he contributed “significant funds” to the dealerships but do not identify any specific dollar amounts contributed. In contrast, the record reflects that petitioners misappropriated amounts in excess of $6 million from the Arnold Palmer dealerships during the late 1980s which they did not report on their 1988 or 1989 income tax return.

As you may guess, the Tax Court ruled against the taxpayer, big time, with 75% civil fraud penalties.

I assume, dear reader, that you aren’t stealing from your employer. If you are, you should be reading another tax blog. But even non-thief readers can draw a lesson. You need basis to take an S corporation loss, and you need the records to show it. The taxpayer here was claiming losses from net operating loss carryforwards created by alleged S corporation losses. He failed to provide sufficient records from the loss years to convince the Tax Court.

The Moral? If you are claiming loss carryforwards, you need to preserve the tax records for the years in which the losses arise, and all intervening years, to document your right to the losses. That’s true even though the statute for limitations for the loss years has expired. Net operating losses carry forward for 20 years. That means you may need to maintain the records for the loss years for 23 years — and for all of the years in between — if you take 20 years to use them up.

Cite: O’Neal, Jr., T.C. Memo 2016-49.

 

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TaxGrrrl, IRS Alerts Taxpayers To New Tax Season Related Phone Scam:

Here’s how the new scam works. The scammer calls you and says that are with the IRS and have your tax return. They then say they need to verify some information to process your return. Those details generally involve asking for your personal information such as a Social Security number or personal financial information, such as bank numbers or credit cards.

To make the scam appear legitimate, scammers often alter caller ID numbers to make it look like the IRS or another government agency is calling. The callers may refer to IRS titles, fake names and fake badge numbers. They may know your name, address and other personal information that they offer to make the call sound official.

Be careful, and remember: if the caller says he’s from the IRS, he’s lying.

 

Peter Reilly, Sales Tax Collection By Out Of State Vendors May End Up At Supreme Court Again. “The reporting requirements may have created a situation illustrative of Reilly’s Second Law of Tax Planning – Sometimes it’s better to just pay the taxes.”

David Vendler, Can a Receiver Take Advantage of the Claim of Right Provisions to Benefit Defrauded Consumers? (Procedurally Taxing)

Paul Neiffer, When Not To Take A Discount? “When a farmer has a taxable estate, we usually try to obtain a discount by splitting up land ownership into “fractional” ownership.”

Kay Bell, How long are you willing to wait for your tax refund? I.D. theft has forced tax agencies to slow down refunds to keep them from going to thieves.

 

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TaxProf, The IRS Scandal, Day 1041.

J.D. Tucille, Poor Americans Will Be Stuck With the Tab for Bernie Sanders’ Generous Promises (Reason.com). “At the end of the day, grandiose promises of massive government programs are cheap. But paying for them has a high price tag—and it will be shouldered by those with the fewest means to afford the cost.” In other words, the rich guy isn’t picking up the tab, because he can’t.

Kyle Pomerleau, It Was Not A Good Week For The Patent Box (Tax Policy Blog):

A patent box, or “innovation box,” is a tax policy that provides a lower tax rate on income related to intellectual property. The stated goal of a patent box is to promote research and development, encourage companies to locate intellectual property in the country with the incentive, and to make a country’s tax code more internationally competitive.

Just as the research credit is an incentive to call more of what you do “research,” the patent box would end up broadening the definition of intellectual property income. The only innovation it would generate would be on the part of the same sort of specialty companies that make their living doing research credit studies.

Renu Zaretsky, Only Thirty-three days till Tax Day! Today’s TaxVox headline roundup covers tax refund statistics so far this season and the hiring by H&R Block of a former senator as a lobbyist for increasing barriers to competition and H&R Block profits through regulation of (other) tax preparers.

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Tax Roundup, 3/11/16: Iowa Sec. 179 coupling advances in both chambers. And: the cost of not filing timely.

Friday, March 11th, 2016 by Joe Kristan

IMG_1291To the floor. Identical bills coupling Iowa’s tax law to federal changes enacted in December cleared the taxwriting committees in each house of the General Assembly yesterday, the day after the bills were introduced. The bills (SSB 3171 and HSB 642) will be eligible for floor vote next week.

The sudden breakthrough clears the way for thousands of Iowans to complete their tax returns with the full $500,000 maximum Section 179 deduction. Thousands more will get to take other benefits, including the $250 above-the-line deduction for educator expenses, deductions for student loan interest, and charitable distributions by IRAs for older taxpayers.

The Governor seems to be on board, reports O. Kay Henderson:

Republican Governor Terry Branstad is praising the breakthrough.

“It certainly is a significant step in the right direction,” Branstad told reporters this morning. “…I always reserve judgment until I see it in its final form, but it appears from what I’ve heard to be something that resolves some big differences of opinion between the two houses and hopefully will make it possible to move forward with our other priorities.”

The coupling process is unfolding as I predicted February 26, after Governor Branstad reversed his anti-coupling stand. It’s too bad we couldn’t have gotten this far much earlier, without disrupting filing season. Better late than never, though. Unfortunately, the coupling is for one year only, so we can look forward to a repeat show next year.

Other Coverage:

Jason Schultz, A Victory for Iowa Taxpayers (Caffeinated Thoughts)

Des Moines RegisterLegislators reach pact on key budget issues

TheGazette.com, Iowa tax coupling to benefit ‘tens of thousands’

Me, Tax Roundup, 3/10/16: Coupling deal may trade one-year Sec. 179 coupling for reduced manufacturing sales tax exemption.

Complete Tax Update coverage.

 

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File or extend that 1120-S on time! The returns for calendar-year S corporations are due on Tuesday. If you can’t file on time, be sure you extend, because the penalties have gone up. From the IRS online Form 1120-S instructions:

Late filing of return.   A penalty may be charged if the return is filed after the due date (including extensions) or the return doesn’t show all the information required, unless each failure is due to reasonable cause…  For returns on which no tax is due, the penalty is $195 for each month or part of a month (up to 12 months) the return is late or doesn’t include the required information, multiplied by the total number of persons who were shareholders in the corporation during any part of the corporation’s tax year for which the return is due. 

You can also get in trouble for filing, but not sending the K-1:

Failure to furnish information timely.   For each failure to furnish Schedule K-1 to a shareholder when due and each failure to include on Schedule K-1 all the information required to be shown (or the inclusion of incorrect information), a $260 penalty may be imposed with respect to each Schedule K-1 for which a failure occurs. If the requirement to report correct information is intentionally disregarded, each $260 penalty is increased to $520 or, if greater, 10% of the aggregate amount of items required to be reported.

Extending your return gives you until September 15 to get that information out. A 10-person S corporation incurs a $1,950 fine for being one day late, and it increases each month. The extension, filed on Form 7004, is automatic, and can be e-filed.

Rant: I despise the use of fines like this as a government funding method. Dinging a one-day timing violation is like the red-light cameras that ding you for not quite stopping before turning right at an empty intersection. No harm, no foul, but pay up, peasant.

 

Big companies get phished: Snapchat, Seagate among companies duped in tax-fraud scam:

The scam, which involved fake emails purportedly sent by top company officials, convinced the companies involved to send out W-2 tax forms that are ideal for identity theft. For instance, W-2 data can easily be used to file bogus tax returns and claim fraudulent refunds.

The embarrassing breakdowns have prompted employers to apologize and offer free credit monitoring to employees. Such measures, however, won’t necessarily shield unwitting victims from the headaches that typically follow identity theft.

Be careful out there, kids.

 

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William Perez, Tax Planning for Clergy

Kay Bell, Ways & Means chairman promises more Congressional scrutiny of IRS security procedures

Jack Townsend, DOJ Tax Promotes Employment Tax Criminal Prosecutions. Never “borrow” withheld taxes to pay other vendors. It can get very serious in a hurry, even in Iowa.

Keith Fogg, A Different “Angle” on Recovery of Costs and Attorney’s Fees. “As we have discussed before, allowing the government to wait until the time of trial or even after trial to concede a case and thereby avoid attorney’s fees frustrates the purpose of the qualified offer provisions.”

Robert Wood, Guilty Mo’ Money Tax Preparers Could Face 8 Years. Nothing says “professional” like “Mo’ Money.”

TaxGrrrl, Does The IRS Have Your Money? Nearly $1 Billion In Old Tax Refunds Outstanding

Jim Maule, Why Not Sell Losing Lottery Tickets? “The answer is simple. The person buying those tickets and representing that they lost the face value of those tickets would be committing tax fraud.”

Dang. Tax Court Holds That Family Vacations Are Not Deductible As Book-Writing Research (Tony Nitti).

 

Richard Auxier, Is your state’s tax system punching above or below its weight? (TaxVox).

TaxProf, The IRS Scandal, Day 1037

 

News from the Profession. CPA Accused of Jamming Cell Phones Just Wanted to Commute in Peace, YOU MONSTERS (Caleb Newquist, Going Concern).

 

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Tax Roundup, 3/8/16: Getting robbed, and again. And: IRS allows retroactive WOTC certification for 2015.

Tuesday, March 8th, 2016 by Joe Kristan

walnutstreet20160308It’s not enough to get robbed; you have to time it right. A “pump-and-dump” securities fraud victim claimed a theft loss deduction. The IRS said “yep, you were robbed.” But they also said that they didn’t time their robbery deduction properly, and therefore were out of luck. And, it turns out, they were.

Court of Federal Claims Judge Sweeney explains (my emphasis, citations and footnotes omitted):

There is no dispute that plaintiffs discovered the theft loss in 2002.31 And, neither plaintiffs nor defendant disputes that in 2002, there existed “a claim for reimbursement with respect to which there [was] a reasonable prospect of recovery Plaintiffs filed their arbitration claim against Donald & Co., Mr. Stetson, Mr. Volman, and Mr. Ingrassia in February 2002, and by the end of that year, they had neither sought to adjourn the proceedings nor withdrawn their claim. Accordingly, in light of the ongoing arbitration proceedings, plaintiffs could not claim a theft loss deduction in 2002. Instead, they were required to delay their deduction until the “year in which it [could] be ascertained with reasonable certainty whether or not” they would receive reimbursement of their losses from their arbitration claim. Plaintiffs determined that the proper year to claim their theft loss was 2004, and filed amended federal income tax returns reflecting the deduction. The IRS disallowed plaintiffs’ refund claim, and takes the position in this litigation that 2004 was not the proper year for plaintiffs to claim their theft loss deduction.

The court said the victims didn’t prove that they were entitled to the deduction:

Plaintiffs claim that they sustained the loss in 2004 because by the end of that year, they had no reasonable prospect of recovering on their arbitration claim. However, under the factual circumstances presented in this case, the test is not whether plaintiffs had a reasonable prospect of recovering on their arbitration claim in 2004, but is instead whether, in 2004, plaintiffs could have ascertained with reasonable certainty that they would not recover on their arbitration claim. To satisfy their burden under the latter test, plaintiffs were required to produce objective evidence that they abandoned their arbitration claim in 2004. They failed to do so. In the absence of such evidence, plaintiffs are not entitled to a theft loss deduction for the 2004 tax year.

The opinion doesn’t say whether the victims filed protective refund claims for subsequent years to preserve their refund rights. It would be another robbery if they were unable to get their theft loss deduction because they got the year right. The statute in such cases should allow taxpayers to recover in the proper year if the IRS successfully second-guesses the timing of a theft loss.

The Moral? If you are a fraud or theft victim, the timing of the loss deduction is very important. If the IRS disputes the loss on examination, be sure to file protective refund claims for open years to protect your rights.

Cite: Adkins, Ct. Fed. Claims No. 10-851T.

 

Speaking of getting robbed twice: IRS shuts down ID-thief assistance portal. A week after The Tax Foundation pointed out that the IRS IP-PIN online portal made identity theft victims vulnerable to being victimized a second time, the IRS has temporarily shut it down:

As part of its ongoing security review, the Internal Revenue Service temporarily suspended the Identity Protection PIN tool on IRS.gov. The IRS is conducting a further review of the application that allows taxpayers to retrieve their IP PINs online and is looking at further strengthening the security features on the tool.

Nothing to see here, move along.

 

Work Opportunity Credit guidance updated for retroactive 2015 credits. Congress re-enacted the expired Work Opportunity Tax Credit retroactively for 2015. To claim the credit for hiring certain classes of hard to employ workers, employers have to get the employee eligibility verified within 28 days. As this was impossible for an expired credit, the IRS yesterday gave employers until June 29 of this year to get the certification for 2015 hires (Notice 2016-22)

 

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Russ Fox, What Part of “Permanent Injunction” Didn’t You Understand? “Mr. Herrera is being held at ClubFed until he closes his business and complies with the injunction.” That should do it.

TaxGrrrl, Understanding Your Tax Forms 2016: 1099-B, Proceeds From Broker & Barter Exchange Transactions

William Perez, How to Mail Tax Returns to the Internal Revenue Service

Keith Fogg, Making Claims and Spending Refunds in Bankruptcy. “The 9th Circuit recently affirmed the district court opinion granting summary judgment to the IRS in a case brought by Mr. Stanley Burrell aka M C Hammer seeking to equitably estop the IRS from collecting on taxes for two years which it failed to include on the proof of claim in his bankruptcy case.”

Jack Townsend, Proposed FinCEN Rulemaking for Rules on FBAR Reporting for Financial Professionals

 

Tony Nitti, Would Hillary Clinton’s Tax Plan Kill The Incentive Stock Option?. Actually, AMT has done that pretty well already.

Robert Wood, President Hillary Won’t Cut Tax Deductions To Charities Like Clinton Foundation. Of course not.

Peter Reilly, Chasm Of Class And Privilege – Clinton Tax Plan Hits Top 1% – Sanders Plan Hits Top 5%. “What I find really interesting is the way in which the proposals reflect the difference in the Sanders and Clinton constituencies.”

Kay Bell, Trump is last holdout as Kasich releases tax returns

 

Jason Dinesen, 6 Things You Might Not Know About Enrolled Agents. “2. We Don’t Work for the IRS

 

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Renu Zaretsky, Budget Chaos, Tax Breaks, Loopholes, and Incentives. Today’s TaxVox headline roundup covers EU tax investigations of multinationals, IRS tax investigations of multinationals, and scoundrels “patriotic millionaires” against carried interests.

TaxProf, The IRS Scandal, Day 1034

Stuart Gibson, Competition Policy and Tax Policy in The Twilight Zone (Tax Analysts Blog). “From a tax perspective in the U.S. (and probably Europe), this is simply a garden-variety case of a taxpayer negotiating a good deal with a foreign tax authority. From a European competition perspective, the answer is a bit more complicated.”

 

News from the Profession. Why Accountants Suck at Marketing (Blake Oliver, Going Concern)

 

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Tax Roundup, 3/2/16: It’s your fault. You trusted us! And: don’t get phished.

Wednesday, March 2nd, 2016 by Joe Kristan

coupling20160213Insults always convince the insulted. Those dumb small businesses, thinking Congress and the legislature would do what they have been doing every year. That’s apparently the take of Iowa Senator Robb Hogg, reports the Caffeinated Thoughts blog:

State Senator Robb Hogg (D-Cedar Rapids) was very critical of small business owners and farmers who have contacted their legislators urging their support on coupling with federal tax changes which encourage growth in Iowa’s economy. Even worse, Senator Hogg shifted the blame from the inaction of Senate Democrats to Congress.

“I understand there are a lot of big crocodile tears being shed over this issue,” Hogg said. “Congress is to blame.”

“Those investment decisions have been made and maybe people had this belief that it might or would happen, but that doesn’t justify their claim that they were counting on it.”

Congress has renewed the higher Section 179 limit every year since 2009, and Iowa has coupled with the $500,000 limit since 2010. There was no indication that Iowa would do anything different until the Governor said otherwise in January. Either way, it’s still a big tax increase just as the ag economy is sagging.

I’ll also add that Sen. Hogg misuses the term “crocodile tears.” Per phrases.org.uk:

Meaning

To weep crocodile tears is to put on an insincere show of sorrow.

Origin

The allusion is to the ancient notion that crocodiles weep while devouring their prey. Crocodiles do indeed have lachrymal glands and produce tears to lubricate the eyes as humans do. They don’t cry with emotion though. Whatever experience they have when devouring prey we can be certain it isn’t remorse.

There’s nothing insincere about the sorrow of finding your taxes increased. The term is better reserved for someone who says, gee, too bad we need to take more of your money, but we sure do need to spend it.

Still, the tactic of criticizing your constituents is an interesting approach. It does seems to work on a national level lately.

 

Kay Bell, March arrives not as lion or lamb, but as a fish phish:

In this latest phishing ploy, one of several the IRS has seen surging this tax-filing season, the faux corporate execs are asking for payroll data, including W-2 forms that contain Social Security numbers and other personally identifiable information.

“This is a new twist on an old scheme using the cover of the tax season and W-2 filings to try tricking people into sharing personal data. Now the criminals are focusing their schemes on company payroll departments,” warns IRS Commissioner John Koskinen.

“If your CEO appears to be emailing you for a list of company employees, check it out before you respond,” adds Koskinen. “Everyone has a responsibility to remain diligent about confirming the identity of people requesting personal information about employees.

Just this morning I got an email from someone I never heard of with a heading: “W2 Information EIN: 13-2655998.” Don’t click on this sort of thing. It’s bad news.

 

Kristine Tidgren, A New Farm Year Begins: Pay Taxes and Perfect Landlord’s Lien! (AgDocket)

Hank Stern, Aetna joins the parade (InsureBlog):

Aetna, and its Coventry affiliate, becomes the next major player to cry “no mas” on new business. In email this morning:

We will not pay commissions for sales with coverage effective dates after March 1, 2016, and continuing through December 31, 2016 effective dates.  This applies to on- and off-exchange business.”

If an insurance company doesn’t pay commissions, it’s a safe bet that they aren’t making money on the product.

Robert Wood, To Fight IRS Tax Bills, Go Step By Step

 

William Perez, Tax Advice for Cannabis Entrepreneurs. Interestingly juxtaposed with another post:

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It’s certainly conceivable that someone could find both posts useful.

 

Jason Dinesen, Sometimes I Wish I Could Just Prepare 1040-EZs.

 

 

Scott Drenkard, Celebrating 75 Years of Facts & Figures (Tax Policy Blog):

Today we released the 2016 edition of Facts & Figures, our pocket- and purse-sized booklet on quick tax facts. This publication has a long history—it dates back to 1941, when our think tank (which was just four years old at the time) published a booklet that was both a source of otherwise hard-to-find government data, and also a treasure trove of infographics to illuminate that information.

The Tax Foundation continues to be a valuable source of tax data and analysis, even though some folks don’t like the math.

TaxProf, The IRS Scandal, Day 1028

Renu Zaretsky, What comes after a big night for Clinton and Trump? The TaxVox headline roundup covers the Super Tuesday results and other tax news.

News from the Profession. FLASH: Sales, Accounting Personnel Face Pressure to Meet Revenue Goals (Caleb Newquist, Going Concern).

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Tax Roundup, 2/29/16: Governor wants to couple Sec. 179 for 2015 only. And: Iowa Farm 1040s due April 30.

Monday, February 29th, 2016 by Joe Kristan

20120906-1One year for you, forever for them. It turns out there’s a catch to Governor Branstad’s change of heart on conforming with the $500,000 federal Section 179 deduction. He only wants it for one year.

O. Kay Henderson reports:

Branstad did not include this recommendation in the plans he submitted to legislators in January. Republicans in the House have voted to make this tax break available to about 177,000 Iowa small business owners and farmers who’re filing their taxes right now and the Republicans in the legislature would like to make it permanent, but Branstad says he’ll only accept a one-year extension.

“We’d lose too much revenue,” Branstad says, “and it would put us in a financial position that we couldn’t sustain it for the long term.”

The Section 179 deduction allows taxpayers to deduct the cost of up to $500,000 of equipment that would otherwise have to be capitalized and depreciated. It is reduced dollar-for-dollar as purchases exceed $2 million, so it only benefits smaller businesses. The Governor would limit the deduction to $25,000, with the phase-out starting at $200,000. With the cost of a combine often in excess of $200,000, the Governor’s plan would increase taxes for many farmers.

The $500,000 has been passed a year or two at a time by Congress, and Iowa has gone along each year since 2010. Congress enacted the $500,000 limit permanently late last year, effective starting in 2015. Many practitioners were surprised when the Governor announced at the beginning of this legislative session that he opposed conforming to the federal limit. The Iowa House overwhelmingly voted for conformity anyway, and it would likely pass in the Senate if Majority Leader Gronstal would allow a vote.

While the Governor says the state can’t afford the $90-95 million cost of Section 179 for smaller businesses, he has plenty of money for tax credits for big companies. Here is what his 2017 budget provides for incentive and economic development tax credits:

Iowa credits fy 2017

So, according to the Governor, while the state can’t afford $90 million for small businesses buying equipment, except maybe for one year, it can afford three times that for big companies and well connected insiders, forever and ever.

People are starting to figure it out, including The Des Moines Register, which ran an editorial yesterday, End subsidy for big companies:

Last year, the state sent checks for $42.1 million to 186 companies under the research activities program, the Iowa Department of Revenue reported.

80% of that went to just eight companies.

Research and development is essential for corporations to compete in a high-tech world. Should taxpayers give big corporations a subsidy for doing this basic business function?

No, concluded a Special Tax Credit Review panel in 2010. Gov. Chet Culver appointed the panel after the film tax credit scandal. The panel recommended eliminating the refundability of the research activities credit for companies with more than $20 million in gross receipts.

“It seems unreasonable for the state to be providing successful, larger corporations refund checks for amounts of the Research Activities Tax Credit over its tax due to the state,” the panel concluded.

Unreasonable, indeed. The panel made other recommendations, including capping tax credits to businesses and providing a five-year sunset on all tax credits, requiring the Legislature to vote to continue them. Lawmakers largely ignored the recommendations.

It’s nice to see someone else remembers the Culver review panel. It found no clear benefit to any tax credit program. But while politicians can issue a press release when a big company gets a $14 million tax credit, nobody gets to cut a ribbon when a farmer buys a new tractor.

Related: Iowa extends Farmer 1040 due date to April 30.

 

Remember when the film credit repeal was going to kill the Iowa film industry? Film, Television Production Thriving in Iowa (KCRG.com). Whenever someone suggests that we kill film credit programs, the economic development people warn that nobody will stay in Iowa if we don’t pay them to.

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Laura Saunders, IRS Says Cyberattacks on Taxpayer Accounts More Extensive Than Previously Reported; Tax data for about 700,000 households might have been stolen (Wall Street Journal). When this first came out, the IRS said 114,000 taxpayers were affected. Then it was 334,000. Are they done yet? The TaxProf has more.

Related: 

Math Is Hard, IRS Edition (Russ Fox). The actual number was more than 700,000. And the unsuccessful attempts didn’t total 10,000; they totaled 500,000!”

IRS: Efforts To Access Taxpayer Accounts Twice As Bad As Originally Thought (TaxGrrrl)

 

Kristine Tidgren, Gifted Assets and Divorce: Nothing is Certain (Ag Docket)

Paul Neiffer, Iowa Farmers Have Until April 30 to File Iowa Tax Returns

Jason Dinesen, Glossary: Iowa Form 126

William Perez, Served Time and Later Found Not Guilty? You Could Be Due a Refund

Annette Nellen, Trailing Nexus – Extra Complexity. “As if it isn’t already difficult enough for a business to know if it has income or sales tax nexus in a state, it might have ‘trailing nexus.'”

Keith Fogg, Private Debt Collection. “Adding non-IRS employees who will contact taxpayers will further confuse taxpayers already receiving calls from scam artist trying to shake them down in the name of the IRS and create other problems as well.”

 

Joseph Thorndike, Forget the Audit: Trump Should Release His Tax Returns Today (Tax Analysts Blog)

Kay Bell, IRS audit doesn’t prevent Trump from releasing taxes

Alan Cole, Why Marco Rubio and Ted Cruz’s Tax Plans Generate More Growth than Donald Trump’s (Tax Policy Blog)

Peter Reilly, Sanders Tax Plan Harder On Millionaires Than Billionaires

TaxProf, The IRS Scandal, Day 1024Day 1025Day 1026.

 

Robert Wood, Oscar Academy Sues Over Racy $230,000 Gift Bags. They want more?

 

 

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Tax Roundup, 2/18/16: Lax IRS data security exposes taxpayer info. And more news!

Thursday, February 18th, 2016 by Joe Kristan

No Walnut STMaking it easy for the thieves. An appalling story in Tax Analysts today tells how the IRS leaves e-file identification numbers vulnerable: Flawed Authentication May Have Exposed E-File PINs ($link Now ungated – thanks, Tax Analysts!). Luca Gattoni-Celli writes on how primitive verification procedures facilitated an automated attack that compromised up to 101,000 taxpayers:

Jeffrey Eisenach, a visiting scholar at the American Enterprise Institute, characterized the IRS’s single-factor authentication process for the e-file PIN application as totally inadequate.

“The authentication that they are using now is something out of the 20th century,” said Eisenach, who directs AEI’s Center for Internet, Communications, and Technology Policy. “It’s hard to believe that the U.S. government checkbook would be so poorly protected in 2016.”

When asked about the apparent authentication requirements, Joseph Lorenzo Hall, chief technologist at the Center for Democracy & Technology, also said he found them disturbing.

SSNs, dates of birth, and the other required information described on the IRS Web pages “are not adequate as authenticators because they’re not secret,” Hall said. “These things are easy to discover about people,” he added, noting that stolen SSNs, which he said were created as identifiers, not security keys, are widely available on the dark Web.

Hall said the authentication process described on the IRS Web pages would have made the e-file PIN program extremely vulnerable to an automated attack of the type the IRS disclosed.

Yet the IRS insists they are ready to take on preparer certification too.

 

Flickr Image courtesy donjd2 under Creative Commons License.

Flickr Image courtesy donjd2 under Creative Commons License.

Scott Greenberg, A Proven Strategy for Boosting Investment (Tax Policy Blog):

At least within the field of tax policy, there is a simple and obvious policy solution for encouraging investments: ending the disincentive for business investment in the U.S. tax code.

Generally, U.S. businesses are allowed to deduct expenses in the year that they occur. However, when it comes to capital expenses, businesses are required to spread out the deduction over time periods ranging from 3 to 50 years. As a result, the U.S. tax code does not allow businesses to deduct the full cost of capital investments, in present value terms; in a recent paper, I estimated that, over time, corporations are only able to deduct 87.14 percent of the costs of investment.

In other words, the U.S. tax code distorts business decision-making by encouraging businesses to spend their money on salaries, ordinary expenses, and paying down debt (all of which lead to an immediate deduction) and not to spend their money on investment (which leads to a delayed and reduced deduction). If businesses were allowed to immediately deduct the full cost of their capital investments – a policy known as full expensing – this distortion would disappear.

The Section 179 deduction does this on a small scale, but Iowa’s political leadership is having none of it.

 

KIWAradio.com, Donations Dwindle For Chickadee Checkoff. “Donations to the Fish and Wildlife Fund, also known as the “Chickadee Checkoff,” go directly to research and habitat development for some of Iowa’s most vulnerable animal species. The checkoff was created by state lawmakers in 1981. At its height, Iowans donated more than $200,000 annually to the fund.”

Kay Bell, H&R Block CEO says some tax simplification necessary. But not enough to make people stay away from H&R Block!

Peter Reilly, Oxymorons In The Tax Law Can Not Be Fixed With Clever Ideas. “The clever idea that Larry and Dora Williams had was to generate some passive income to abosorb their passive losses.”

Joni Larson, Changes to the Rules of Evidence Applied in the Tax Court (Procedurally Taxing).

TaxGrrrl, Understanding Your Tax Forms 2016: 1099-DIV, Dividends And Distributions.


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David Brunori, Transfer Pricing Is All the Rage — in the States (Tax Analysts Blog). “When proving arm’s-length pricing, the side that can spend the most on good lawyers, accountants, and economists almost always wins.” That’s where kangaroo courts come in.

TaxProf,The IRS Scandal, Day 1015. Why would you think it odd that the IRS hasn’t acted on an exemption application for six years, you silly wingnuts?

Renu Zaretsky, Simple is as simple costs. Today’s TaxVox headline roundup covers the Cruz tax plan, on-line sales tax legislation, and tax finagling involved in financing the Harry Potter films.

 

Is there anything they can’t do?

Clinton Calls for Expanding Housing Tax Credits (Tax Analysts, subscriber link)

H.R. 4563 Would Provide Credit for Zika Vaccine Research (Tax Analysts, subscriber link)

 

News from the Profession. Tax Season Scares Millennials (Caleb Newquist). That just means they’re paying attention.

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