Plan C through Z? House Speaker Boehner’s effort to pressure the White House into compromise with “Plan B,” a proposal to retain 2001 tax rates on incomes below $1 million, died last night. The Speaker cancelled a vote on the plan when it was clear that it lacked enough support to pass. The Wall Street Journal reports:
After pulling his bill without taking a formal vote, Mr. Boehner unexpectedly disbanded the House until after Christmas, leaving behind
uncertainty about whether Congress and President Barack Obama would be able to avoid $500 billion in spending cuts and tax increases that begin in January.
So what now?
“The House did not take up the tax measure today because it did not have sufficient support from our members to pass,” Mr. Boehner said in a written statement after a brief meeting with House Republicans. “Now it is up to the president to work with Senator Reid on legislation to avert the fiscal cliff.”
Is it time to panic? Will we see a filing season delayed until the end of March, a big 2012 AMT hit, and tax increases all around? Joe Weisenthal at Business Insider says we aren’t over the cliff yet:
Indeed. If Boehner couldn’t even get the GOP to support a law that would let taxes revert on millionaires, how is he going to get GOP support on a deal that would let taxes revert on those making $250K or $400K, as the President would like to sign?
Here’s the thing with that. Boehner doesn’t need to get all of his caucus, because in the end, if Obama supports the ultimate compromise, then it’s safe to say that the Democrats will bring about 100+ votes in the house to support the bill. And this was always true. It was always the case that the eventual compromise would see Boehner lose 70 or more Republicans, to be made up with Democrat support. So nothing changes on that front.
Fiscal Cliff Notes:
Christopher Bergin, Fiscal Surrender (Tax.com):
So, I would suggest that while General Boehner wants things to look like he is negotiating a budget deal, he is actually seeking the best surrender terms that he can get. And if the President is a good enough general to understand his position, he will not try to over-exploit it.
Paul Neiffer, Farmers Might Delay Higher Tax Rates for Three Years? Thanks to income averaging, a trick available only for farmers, “…you might be able to earn $1 million from farming and have most of it still subject to the old lower tax rates” if rates go up next year.
Nanette Byrnes, Blue states lose: how avoiding the U.S. fiscal cliff hits some states harder than others (Tax Break)
Tax Policy Blog, Tax Cut Expiration Would Impact States Unevenly
Howard Gleckman, Should Working Class Families Pay Higher Tax so High Income People Can Pay Less? (TaxVox)
St. Louis area preparer “Tiger” Zerjav pleads guilty to tax crimes. A St. Louis-area CPA who survived an IRS effort to shut down his practice through a civil suit lost a much bigger fight yesterday. Frank “Tiger” Zerjav pleaded guilty to four tax crime counts in Federal District Court. Courthouse News Service reports:
Frank L. “Tiger” Zerjav Jr., 39, of Wildwood, Mo., pleaded guilty to four counts of tax evasion from 2001 to 2004, prosecutors said.
He and his father, Frank L. Zerjav Sr., were principals in two entities: Zerjav & Company, a full service accounting firm, and the Advisory Group USA, which offered tax planning and asset protection strategies. Zerjav admitted that he funneled his income into several S-corporations and failed to include that income on his tax returns.
The IRS attempted to enjoin the Zerjavs from tax practice in 2008, alleging that they set up S corporations for their clients and then deducted personal expenses on corporation tax returns — including a “Precious Moments” figurine collection. The Zerjavs settled under what appeared to be favorable terms in 2010.
Jason Dinesen, New Preparer Requirements on Earned Income Credit = Higher Fees for Clients. That’s on top of the increase in fees that will result from the massive contraction of the preparer industry that we may be in for thanks to the IRS preparer regulation regime.
News you can use: Pot Business May Be Legal In Washington State But There Are Still Rules (Peter Reilly)
The Critical Question: Are Holiday Weddings a Form of Tax Planning? (Jana Luttenegger, Davis Brown Tax Law Blog):
Your marital status for tax purposes is determined as of December 31. That means if you get married on New Year’s Eve, you are considered married for the entire year and can file as a married couple. Likewise, if a divorce is finalized by the end of the year, you will be considered unmarried for the entire year. Trust me, I am not the only one that has wondered if certain people getting married on New Year’s Eve did it for tax purposes.
It’s a special Friday Buzz at Robert D. Flach’s place!
Not so Fat Joe not so good at taxes. A rapper who performs as “Fat Joe” is in tax trouble, reports AP. The story says Joseph Cartagena pleaded guilty yesterday to not reporting nearly $3 million in income over two years.
Oddly, he’s not so fat, according to the story:
Wearing a navy suit, Cartagena looked fit and considerably slimmer than the former size that had earned him his rapper nickname. He has been very public about his efforts to shed weight after fellow rap stars died from obesity-related issues and was recently in Newark to speak to schoolchildren about health and fitness.
It’s nice that the schools find such good role models for the kids.