Roth & Company, P.C. Tax Update Blog
If he had succeeded in killing her, would he have been an argument for the FairTax?
March 18, 2010
When a desperate loser killed an IRS agent and himself with an airplane in Texas, some people foolishly used him as a symbolic victim of the income tax, or the software industry's rules on independent contractors, or something. Congressman Steve King said that if we had just listened to him and enacted the FairTax national sales tax, that murder-suicide would never have happened.
Earlier this week another loser's battle with the IRS came to a quieter end. An appeals court upheld Floridian Randy Nowak's conviction for attempting to hire a contract killer to kill an IRS agent. Mr. Nowak apparently felt the agent was getting too close to his offshore accounts. For good measure he wanted to burn down the local IRS office.
You don't need to be a defender of the tax code to realize that murdering IRS agents is a bad thing. You don't see anybody using Mr. Nowak's plight -- he'll probably never be out of prison alive -- as an argument against the tax law. Still, the only difference between Mr. Nowak and the Austin tax kamikaze is that Mr. Nowak failed. That should give pause to anybody who views the Austin guy as something other than a selfish loser.
Cite: Nowak, CA-11, No. 09-11329
Related: Tax anger nearly causes another tragedy
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=94ead26e-4c48-43ff-8080-4673615df73d)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Iowa has high income taxes, but at least our property taxes are high
March 18, 2010
Click image to enlarge
Tax Policy Blog has the details.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=3ee75656-dce5-4254-93f4-cb2ce2720a80)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Happy St. Patricks Day!
March 17, 2010
Behave. Or be careful.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
The real dirty dozen tax scams
March 17, 2010
My new post at Going Concern. Hint: they're done to you, not by you.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
The Dirty Dozen
March 17, 2010
The IRS has come out with its "Dirty Dozen" list of tax scams. Return Preparer fraud tops the list -- a sly plug for their bid to increase their power over preparers. Other scams listed include:
Hiding Income OffshorePhishing
FIling Fals or Misleading Forms (duh!)
Nontaxable Social Security Benefits with Exaggerated Withholding Credit
Abuse of Charitable Organizations and Deductions
Frivolous Arguments
Abusive Retirement Plans
Disguised Corporate Ownership
Zero Wages
Misuse of Trusts
Fuel Tax Credit Scams
Falling for any of these scams could make your financial life miserable for years to come. Keep in mind the first rule for avoiding scam: if it sounds too good to be true, it probably is.
More coverage:
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Iowa tax credit haircut advances
March 17, 2010
The legislative Democrats' plan to trim Iowa's tax credits advanced out of committee this week. The tax committees in each house approved the bills, SSB 3250 and HSB 738, along party lines.
The main elements of the bills are:
- Halving the R&D credit for big companies
- Limiting the cap on certain business tax credits to $120 million, from the current $185 million
- Suspending the film credit for one year
- Setting up an "oversight committee" for tax expenditures, so when the next scandal comes around, they can say it was just an oversight.
As most of these credits are just government spending run through the tax return, they are a natural target when the state is low on cash. Still, the legislature isn't addressing the real issues: are the tax credits worth keeping at all? There's no evidence they do any good. Far better to scrap the credits, lower the rates, and let us keep our money without running it through the Department of Revenue first. Something like the Quick and Dirty Iowa Tax Reform Plan.
More coverage:
Link • Comments (0) • TrackBacks (0) Share & Bookmark
That's OK, the press conference was worth the squandered millions
March 17, 2010
When politicians enact "economic development" tax breaks, their goal isn't to help the economy; it's to provide opportunities for press conferences to boast about the "new jobs." Once the press conference ends, so does their interest. David Brunori tells how this plays out in Massachussetts:
The Boston Globe in an excellent March 14 article reported that Massachusetts has given away hundreds of millions of dollars in state and local tax breaks to companies that created few or no jobs. Indeed, many of the recipients of the tax breaks actually moved jobs overseas or just laid workers off. For example, Nortel Networks received $2 million from the state and promised to add an additional 800 workers to its staff of 2,200. Today Nortel has 145 employees in the state but continues to enjoy the tax breaks.
That's why we shouldn't have been surprised that Iowa's film credit program was grossly mismanaged. The politicians wanted to meet starlets and have happy stories about the film crews they bribed to come here. It's no fun checking invoices to make sure the money isn't plundered.
UPDATE: More here.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=a0e48ca7-c3de-4afe-9753-ba9644a7cbbf)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
If you just make up tax return numbers, you can go to jail.
March 17, 2010
If New York does it, it's business as usual.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=d6ae4729-3618-4b52-9f4c-b695a7944ea3)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Shooting the offshore jaywalkers
March 17, 2010
The Senate is about to pass a new offshore tax crackdown law. A key provision: penalties up to $50,000 for failure to report offshore accounts on 1040s, whether or or not any tax is due. Jack Townsend has the details.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=5dec8fd6-ae4f-45cd-a0ae-511785478ba2)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
How many legs does a dog have?
March 17, 2010
My new post at IowaBiz.com covers the rules for making tax-free expense reimbursements.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=eacfdb37-86f2-4d22-bf0c-69c19988398c)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
W&M chair: Retroactive estate tax reinstatement, 45% rate...
March 17, 2010
...and maybe an option of choosing between 2009 and 2010 tax law for estates of those dying this year.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=3d530a28-dcc6-4017-aa27-aedb219f3312)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Lessons in non-profit governance
March 16, 2010
Note to members of non-profit boards: if your executives don't want you to talk with the outside auditors, that's a really, really bad sign.
Yet that's what happened at the Iowa Association of School Boards, the entity that runs Skills Iowa, "a special project by Sen. Tom Harkin," according to testimony by the outside auditor yesterday, as reported in the Des Moines Register:
Ted Lodden, who is with the association's accounting firm, Brooks Lodden, also testified at Monday's hearing.Lodden described a bizarre chain of events in which the association's top staffers, including Kilcrease, tried to prevent him from telling board members of his concerns with the agency's finances.
Lodden said employees repeatedly blocked his firm's access to the board last fall. He said he eventually bypassed the staff and contacted board members via e-mail, asking to meet with them. He then received what he called a "a very threatening letter" from an association lawyer demanding that he retract his request for a meeting.
Lodden called it "the strangest thing I've ever been through in my entire career."
Strange, indeed. Non-profit boards approve the hiring of accounting firms, and normally the audit report is reviewed with a board finance committee or audit committee. You'd almost think they were hiding something:
The organization's former chief financial officer is alleged to have used his association credit card to buy airline tickets for a vacation to Bora Bora. There are concerns that some of the association's affiliate businesses have lost millions of dollars in recent years.Last fall, Kilcrease and then-board President Jack Hill revised her employment contract to include additional compensation for payroll taxes deducted from her check. That raised her pay from $210,000 to $367,000.
Now the FBI is poking around because of the federal money that goes to the organization:
The association calls Skills Iowa "a special project by Sen. Tom Harkin." The project is led by association employee Susie Olesen, a longtime friend of Harkin who has an extensive background in education and curriculum development.Skills Iowa buys software from U.S. Skills, a software company run by Michael Perik of Rhode Island. Association officials say Skills Iowa has paid Perik's company at least $6.2 million since August 2007. Over the past 10 years, Perik has contributed more than $1 million to various Democratic Party campaign committees around the nation.
Any similarities to other organizations that paid outlandish salaries and bonuses to their executives while getting money from Senator Harkin's string-pulling are surely just coincidental.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Film Credits: the video
March 16, 2010
Too bad this video from the Tax Foundation didn't get a tax credit:
Featuring Natasha Altamirano and a film-credit finagler who really needs to button that shirt.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
He's got them low-down GPS bracelet blues
March 16, 2010
A Minnesota bluesman awaiting sentencing on tax evasion avoided being locked up right away, but he won't be hard to find, reports StarTribune.com:
After a court hearing packed with his customers and employees, Steven M. Renner remained a free man Monday despite a federal prosecutor's efforts to have him locked up because of allegations that he ran a Ponzi scheme. He will be required to wear a GPS tracking device, U.S. District Judge Donovan Frank decided.
Why did The Man want him locked up right away?
On Feb. 19, agents of the U.S. Secret Service and FBI raided Renner's businesses, looking for evidence of what they said is a "suspected Ponzi scheme that is headquartered in Minneapolis and that is operating over the Internet." Agents also seized business accounts holding more than $24 million.
Not a bad stash for a bluesman.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Gourmet Mini Cinnamon Rolls Tax Carnival!
March 16, 2010
It's almost St. Patricks Day! Technically, today is St. Meningaud's Day, but most taverns don't offer specials for him.
While you prepare to get your Irish on tomorrow, get yourself in shape at Kay Bell's new Carnival of Taxes!
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=3bdf3571-8125-4368-8d38-ab811fc3984a)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Can you deduct the value of your time donated to charity?
March 16, 2010
No way, no how, explains TaxGrrrl:
Nope, it doesn’t make a difference if you can value your services or not – the donation of personal services is never deductible as a charitable donation. I can value my services pretty easily since, in many instances, I charge by the hour as an attorney. But it doesn’t matter: the IRS will not allow you to assign a value to your time for the purposes of a donation.
Sometimes a good deed is truly its own reward.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Cedar Rapids hates its citizens
March 16, 2010
From Radio Iowa:
The grace period for drivers caught on camera running a red light in Cedar Rapids ended Sunday, and they will now be looking at a fine of up to $100. Cedar Rapids police spokesperson, Cristy Hamblin says they been sending out warnings to drivers for the last 30 days to prepare drivers.
Is it about safety? Don't be silly:
Hamblin says they will be able to view the violation and then decide if they want to pay the ticket or appeal. Hamblin says they have seven more cameras that will be going up. The cameras are expected to bring in around $750,000. Red light cameras are also in use in Sioux City, Council Bluffs, Clive and Davenport.
So if you have to write a $100 check because you didn't quite stop before turning right on red at an empty intersection in Cedar Rapids, be sure to send a thank you next time you vote.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=fde05f4b-ecb7-492f-996c-76e3984b7d95)
Via The Beanwalker.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Remember: stuff is due today!
March 15, 2010
Today is March 15. That means tax returns, or at least extensions, are due today for calendar year corporations. A few things to keep in mind:
- If you extend your return filing date to September 15, you get another six months to make your 2009 pension and profit sharing contributions.
- If you owe money with your tax return, you should have already arranged to pay it by EFTPS. If you haven't paid, get it in right now. You might be able to pay today at a bank using a Form 8109 coupon, if you have one, and if you can find a bank that still takes federal payments.
- If you owe but can't pay yet, you still should extend. The penalty for late payment is 1/2% of the amount due per month, plus interest, but the late filing penalty is 5% of the amount due per month plus interest.
- Even though S corporation returns typically have no tax due, you still need to file or extend them today. The tax law imposes a penalty of $89 per K-1, per month, for filing an S corporation return after the due date, including any extension. That means as S corporation with ten shareholders that files one day late has an $890 late filing penalties. That penalty goes up to $195 next year.
- If you can e-file your extension, do so. It's safer and it saves you a trip to the post office. If you must send your return or extension the old-fashioned way, be sure you use "Certified Mail, Return Receipt Requested," and hang on to that postmarked receipt like a family heirloom.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=6c327508-f2f0-49a1-a9f2-99fd9fa1f4d7)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
You mean I might go to jail if I plead guilty to 20 federal charges?
March 15, 2010
A Cedar Rapids landlord who recently was convicted of tax evasion is having second thoughts about pleading guilty to defrauding insurance companies:
Landlord Robert Miell is now asking to withdraw his guilty pleas for 18 counts of mail fraud and two counts of perjury he made last year.He was also convicted by a jury in January 2009 for two counts of tax fraud and is to be sentenced June 7.
Miell has a new lawyer now, Alfredo Parrish of Des Moines, and the motion filed Thursday claims he had ineffective counsel and the court didn’t inform him of the penalties and restitution he faces.
He was charged with filing fraudulent hail damage claims. He owned over 400 rental properties in Eastern Iowa. The liquidation of his assets to cover his debts has begun.
In the unlikely event he gets his plea overturned, he still has to deal with that tax conviction.
Related:
They got Capone on tax charges. The Cedar Rapids Landlord, too.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=611fef8f-dba2-419f-8be2-e495d23fd872)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
'Federal accountants, for example, perform work that has more complexity and requires more skill than accounting work in the private sector'
March 15, 2010
Yes, it's hard being an IRS agent. Just ask IRS Agent Mark E. Hunt:
An Internal Revenue Service officer and three other Maryland men have been accused of running a $1.2 million tax evasion scheme, according to an indictment unsealed in federal court in Greenbelt.Potomac attorney Irvin Catlett allegedly orchestrated the scheme. The indictment says he paid IRS Revenue Officer Mark E. Hunt to provide taxpayer information and pose as Catlett's "man on the inside" to convince clients that Catlett's tax shelter scheme was safe from prosecution.
The taxpayers naturally trusted Mr. Hunt because government employees are worth more -- just ask the head of the Treasury Empoyees union.
The hard work allegedly took a terrible toll on Mr. Hunt:
Hunt, prosecutors said, would display his IRS credentials during meetings with clients to assure them that he was an IRS employee who could protect them from the "inside."
Catlett has been charged with fraud, obstructing IRS laws, and 10 counts of aiding and assisting in the preparation of false tax returns. He faces up to 38 years in prison. Hunt faces up to 13 years in prison for fraud and lying to an IRS investigator when he allegedly denied accessing a taxpayer's account other than for official business. Cullum and Unterreiner face up to five years in prison on fraud charges.
Well, the threat of 13 years in prison would make most people want higher salary and benefits.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=46f82a46-b7e9-44fe-8f97-be7c268c240e)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Maybe they're just nuts
March 15, 2010
Some folks unwisely try to draw deep lessons from the behavior of lunatics. Tax lawyer Peter Pappas provides some needed perspective:
If you could rewind the lives of these people and view them on your DVD, you would find that they have long histories of blaming everyone but themselves for their problems.
Sometimes wacky behavior is just wacky behavior.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Spring Thaw Cavalcade
March 15, 2010
The 100th running of the Cavalcade of Risk is up at Chatswood Consulting!
Always good stuff at the blog world's roundup of insurance and risk management posts, including InsureBlog's analysis of the tenuous links between health insurance and mortality, so slide on down and check out the party!
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Michigan is a strange state
March 13, 2010
At least it is based on this information from a taxpayer, as passed on by a colleague:
As an FYI... we have a client who filed their MI Business Tax return this summer and still has not received their refund.They called the MI department of Treasury and this is the answer they were given:
They claimed a non-refundable Credit on line 35 of the return. Returns with certain non-refundable credits have been flagged for review. However, they do not have procedures in place at this time to review the returns so they are waiting to see what to do with them.
No I did not make that up, that is the actual answer they were given. Their money is sitting in limbo while the MI department of revenue decides what procedures to put in place to review the non-refundable credits.
So, if you have anyone who has filed a MI Business Tax return and has not received their refund this may be the issue.
We also claimed an overpayment applied on the return and are unsure how that will be handled on their 2009 return.
Any of you Wolverines out there: are you running into this?
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=aad15e2c-ad61-4009-b968-6d40d65e823b)
Link • Comments (2) • TrackBacks (0) Share & Bookmark
Spending run through a tax return is still spending
March 12, 2010
Iowa's legislative Democrats have floated a proposal to cut back on state tax credit. Their effort, HSB 738, would lower the limits on some credits, suspend the scandal-ridden film credit, and form an oversight committee to ignore the credits until the next scandal monitor and evaluate the credits annually. Jason Clayworth reports:
The state’s film tax credit program would remain suspended for two years.The maximum amount that could be awarded on five popular credit programs that largely deal with job creation, film production and business research would be lowered from a total of $185 million to $120 million.
Cut Iowa’s tax credits in its venture capital, “Iowa Fund of Funds” program from $100 million to $60 million.
The state’s Economic Development Revolving Loan Program Tax Credit would be eliminated, which is a 20 percent tax credit used to encourage business growth.
Many other of the state’s more than two dozen tax credit programs would see an overall cut of 10 percent.
The public would be given more information on who, why and how much tax credits are spent.
Programs would be regularly reviewed for performance under a new “Tax Expenditure Committee” that would report to the legislature.
It's far short of the real solution, but at least they seem to realize there is a problem:
The more than two dozen tax credit programs on Iowa’s books will cost the state an estimated $525 million in the fiscal year that begins July 1, that up by 75 percent from the fiscal year that ended June 30, 2007.
For comparison, the entire corporation income tax is budgeted to net Iowa $165 million this fiscal year.
Unfortunately, some folks still don't get it:
Republicans – who were not part of a working group that drafted the bill – expressed concern. Reviews are necessary but some of the cuts could hurt business, they said. They accused Democrats of proposing a tax increase."Iowans are writing bigger tax checks and that’s a tax increase," said House Republican Leader Kraig Paulsen of Hiawatha.
Many of these credits are refundable, and others are transferable. When a credit is refundable, like the Iowa research credit, you can have a negative income tax - in other words, a subsidy. A reduced subsidy isn't a tax increase. When a credit is "transferable," a recipient who can't use it sells it. When a business does it, it's called "factoring receivables." The only difference from spending is that it is spending receivables rather than cash.
Unfortunately, refundable and transferable credits are set to remain in the system under this bill. The legislature isn't ready for the bold but necessary reforms, like the Quick and Dirty Iowa Tax Reform.
Other coverage:
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=e596c3f3-ac43-42c5-b5aa-c475cbc87d3c)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Don't give them any ideas
March 12, 2010
Subsidize them and they will come:
Sen. Herman Quirmbach, D-Ames, an Iowa State University economics professor, said he sees no way to fix the film tax credit under a suspension that would make it pay.“So many states have tried this in various ways and there seems to be broad-based failure,” he said. “I don’t know how we can succeed when so many others have failed.”
Elias said Iowa could become the surf board capital of the world if it pays 50 percent of the production costs like the Iowa Film Office initially was doing with its “half-price” filmmaking promotion that overcommitted state outlays estimated at up to $38.5 million.
Replace "surfboards" with "ethanol and windmills" and that pretty much describes Iowa's economic policy.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=0b89208c-cf5e-4d07-aa34-3ce06ee4dceb)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Still futile after all these years
March 12, 2010
I'd think twice about getting tax advice from somebody whose web site looked like this:
Yet people still came to Carel Prater to buy quack advice about using the "Section 861 argument" that U.S.-source income is nontaxable. The injunction pictured above said Mr. Prater wasn't supposed to do that, and this week Mr. Prater was convicted of "corrupt interference with the Internal Revenue Laws, aiding and assisting the filing of a false tax return, failure to file a tax return, criminal contempt, structuring transactions to avoid reporting requirements, and making false declarations before a grand jury."
The "Section 861" argument is the same one used by Wesley Snipes, leading to his failure-to-file conviction that he is currently appealing.
Prior Tax Update Coverage: YOU KNOW YOU'VE HAD A BAD DAY (II)...
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Got options?
March 12, 2010
Here are "Ten Tax Tips For Stock Options," via Kay Bell.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
That check is taxable, whether or not you cash it.
March 11, 2010
An Illinois man got a $16,987 check for doing some subcontract work for a "long-time friend and colleage" in 2006. He got a 1099 that included the check, but he says he didn't get around to cashing it until after year end, so he left it off the return. The Tax Court yesterday said that didn't work:
Petitioner does not dispute the total amount of the compensation, but he does dispute that the final payment of $16,987 was received in 2006. Petitioner concedes that the check bore a December 2006 date but contends that he did not, and agreed not to, cash the check immediately...Petitioner provided no evidence beyond his own testimony of the purported agreement with MPC not to cash the check. He did not call his long-time friend and colleague or any other person as a witness to corroborate his testimony about the purported agreement. Petitioner agreed that there was no reason to believe the check would not be honored...
In conclusion, the Court finds that petitioner has not shown that there was an agreement not to cash the check in 2006 even though the check was received in 2006. Accordingly, petitioner received $16,987 in unreported nonemployee compensation in 2006, and respondent's determinations are sustained.
The Moral: If you get the check, you get to pay the tax.
Cite: Morgan, T.C. Summ. Op. 2010-29.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=d9afd534-48b6-40b0-a820-829d9cc4ff62)
Link • Comments (2) • TrackBacks (0) Share & Bookmark
Gronstal: forget coupling
March 11, 2010
It looks like Iowa isn't going to bother to couple with 2008 or 2009 changes in the federal tax law, reports the Quad City Times:
"It’s unlikely we’re going to find the ability to give up significant state revenue this year when we’re cutting every thing else in state government," Senate Majority Leader Mike Gronstal, D-Council Bluffs, said Wednesday.Not conforming Iowa’s tax code to federal changes in 2008 or 2009 amounts to a roughly $90 million issue over the two years, said Jim McNulty of the state Department of Revenue.
That means taxpayers will have to make extra adjustments from their federal return to compute their Iowa taxable income. These will include:
- No bonus depreciation
- The 2009 Section 179 deduction for Iowa will be limited to $133,000. The federal limit for this deduction for the cost of equimpment that would otherwise be capitalized and depreciated is $250,000. Iowa has conformed to the 2008 Section 179 limit.
- No $250 deduction for educator expenses. This will trigger lots of $17 deficiency notices for teachers. (1040 line 23)
- No deduction for higher education tuition and fees (1040 line 34)
- No deduction for the sales tax paid for a new car purchase.
- No exclusion for the first $2,400 of jobless benefits.
- No Schedule A deduction for state and local sales taxes.
- No retroactive 2009 deduction for contributions to charity for Haiti disaster relief paid between 1/1/2010 and 2/28/2010.
One more argument for the Quick and Dirty Iowa Tax Reform.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=7a847223-65a6-4dc8-941d-342d1c2801e6)
Link • Iowa Tax Law • Comments (0) • TrackBacks (0) Share & Bookmark
Sure, let's have another round, put it on the grandkid's tab
March 11, 2010
The federal individual income tax is by far the largest source of operating revenue for the government. The Tax Foundation yesterday reported that we are moving ever closer to the point of no return, when only a minority pays income tax.
When you don't have to pay, you don't care so much about the bill.
Via The TaxProf.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Dinero Rapido tiene problemas
March 11, 2010
Nothing throws cold water on a preparer in the middle of tax season like this:
The United States has sued a Garden City, Kan., tax preparer, Jose Lares, seeking to permanently bar him from the tax-preparation business, the Justice Department announced today. The civil injunction suit, filed with the U.S. District Court for the District of Kansas, alleges that Lares prepares returns through Dinero Rapido Tax Service, formerly known as Income Tax Dinero Rapido, in Garden City.According to the government’s complaint, Lares claims false dependent exemptions and false filing statuses on customers’ returns. The complaint alleges that Internal Revenue Service (IRS) audits of customers of Lares’s former company resulted in clients owing over $2 million. The complaint further states that IRS audits of customers of Lares’s current business, Dinero Rapido Tax Services, has revealed an average tax loss of over $6,000 per return.
To some customers, that might almost seem like an endorsement, except that Dinero Rapido's clients can expect an auditoria rapida from the IRS.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=6997644b-3753-414e-983f-93e469e127de)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
It compensates for loss of the right to bear arms
March 11, 2010
Tax Policy Blog reports that Oregon offers a $50 tax credit "for the permanent loss of two limbs." It's part of a roundup of strange tax rules. No word on whether you can get partial credit for a temporary loss of a limb, or for losing only one.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
The free cheese isn't taxable either
March 11, 2010
The $250 "economic recovery payments" issued last year to social security recipients aren't taxable. TaxGrrrl explains.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Your deduction may be Schedule C, or it may be nothing at all
March 10, 2010
One of the first things people figure out about tax returns is that deductions on Schedule C are better than deductions on Schedule A. A legitimate Schedule C deduction is fully-deductible whether you itemize or not, for regular taxes or alternative minimum tax. If the deduction is instead an "unreimbursed employee business expense," it is only deductible if you itemize, only to the extent your "miscellaneous" deductions exceed 2% of your adjusted gross income, and it isn't deductible at all in computing your AMT.
A Montana investment advisor, a Mr. Purdy, figured out the difference. He worked for Merrill Lynch, where he received a W-2 and filed his returns as an employee for three years. Relationships soured and he sued Merrill Lynch, eventually getting a $393,000 settlement, $120,000 of which went to his attorney.
The taxpayer deducted the attorney fees as a Schedule C deduction for a new investment advisory business he set up. The IRS had other views. The Tax Court this week came down on the side of the IRS:
In addition, the parties treated Mr. Purdy as an employee. The two agreements Mr. Purdy signed consistently mentioned his employment with Merrill. Merrill paid Mr. Purdy a salary, withheld Federal and State taxes, and issued Mr. Purdy a W-2 every year. Mr. Purdy received benefits of the kinds an employee would receive, including health insurance and a retirement plan. Mr. Purdy reported the wages he earned as an employee consistently each year he was working at Merrill and even reported the settlement award as wages despite having been fired. At no time did he report any self-employment income from Merrill. Moreover, he claimed unreimbursed employee business expenses while he was working at Merrill. Mr. Purdy's tax returns during his tenure at Merrill never included a Schedule C related to his financial adviser activities and instead included his expenses related to his advising as unreimbursed employee business expenses...Accordingly, we find that Mr. Purdy incurred these legal fees as an employee, not as an independent contractor, sole proprietor, or partner
This highlights a big problem that lawsuit winners often face. They are taxable on the whole lawsuit proceeds, but if the lawsuit arises from employment, the legal fees are a Schedule A deduction -- and if you have alternative minimum tax, that's often the same as non-deductible. After the lawyers and the IRS are done, the lawsuit winner may get the smallest cut of the awards. Moving the deduction to Schedule A cost Mr. Purdy about $42,000.
Cite: Purdy, T.C. Summ. Op. 2010-26.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=66cd7999-e174-4026-a6c2-5cd661a1e642)
Link • AMT • Comments (0) • TrackBacks (0) Share & Bookmark
You don't need a go-between to pay your taxes
March 10, 2010
A California tax preparer steals from his clients in a way as lame as it is sleazy:
David Canales, 53, faces up to 25 years in prison at a sentencing hearing set for May 24. He was indicted on 18 counts of fraud and tax evasion in August 2009.Between 2001 and 2008, Canales told his clients at Executive Management Services they owed money to the Internal Revenue Service and/or California’s Franchise Tax Board. He told them to write the checks to the initials IRS or FTB, officials said.
Canales had bank accounts under the names of two companies he founded that used the initials IRS and FTB. Instead of routing the money — more than $1 million — to the appropriate agencies to satisfy his clients' taxes, Canales admitted he deposited the money into his accounts, officials said. He then either filed a false tax return showing his clients owed little or no money in taxes or failed to pay them, official said.
A legitimate preparer will either e-file your returns and use direct debit to the tax agenceies to pay your tax, or he will present you paper returns for you to mail. If the preparer insists on getting checks from you to submit to the tax agencies, that's not normal.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
If a tax plan really works, you don't have to hide your assets
March 10, 2010
When somebody tells you that a tax avoidance plan is legal at the same time he tells you how to hide your assets from the IRS, you might wonder: If this works, why do I need to hide my assets? Many people blow right by that logical dilemma, including this retired FBI agent:
Jan Lindsey, 67, of Henderson pleaded guilty before U.S. District Judge James C. Mahan to one count of felony tax evasion and is scheduled to be sentenced July 9.According to the plea agreement, Lindsey worked as an FBI agent for 26 years and retired from the agency in 1995. For the next 10 years, Lindsey worked for the FBI as a contractor performing background investigations. Prior to 1999, Lindsey timely filed tax returns with the IRS.
Beginning in 1999, Lindsey started using illegal tax avoidance methods to file his and his wife’s joint tax returns. Lindsey failed to timely file or pay federal income tax for the years 1999 through 2006, and committed various acts that were designed to hide his income and assets from the IRS. He placed assets in nominee names, presented or recorded fraudulent documents in an attempt to obtain lien and levy releases on his property, filed false returns after liabilities were assessed in an attempt to reduce or eliminate his unpaid liability, and presented frivolous financial or negotiable instruments to the Treasury Department in claimed payment of his outstanding tax liability.
If the only way a tax scheme works is if the IRS can't reach your assets, it doesn't really work.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=1a00f3a9-886e-490d-91db-5fccfac587cf)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Because expensive pizza has fewer calories
March 10, 2010
U.S. researchers estimate that an 18 percent tax on pizza and soda can push down U.S. adults’ calorie intake enough to lower their average weight by 5 pounds (2 kg) per year.
Yes, without pizza, people would instinctively switch to carrots and mineral water, instead of, say, burgers and beer.
Via Peter Pappas.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
IRS will soon hang up on 2006 tax refunds
March 10, 2010
William Perez has a timely reminder:
Individuals have until April 15, 2010, to file an original or amended tax return for 2006 and receive a refund from that year. The IRS says it has about $1.3 billion in reserve for people who still need to file their 2006 returns.Additionally, taxpayers had a special one-time-only tax credit available to them in 2006. It was called the telephone excise tax refund. Basically this is a tax credit available to anyone who had telephone service, whether landline or mobile, and represents a refund of excise taxes that were ruled unconstitutional
More here.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=dba1b208-362d-443f-a57a-431365fcd65d)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Film Credits: putting Hollywood before your kids.
March 09, 2010
Iowa's legislators may not be able to bring themselves to kill the scandal-ridden film tax credit program, reports the Quad City Times:
A three-member subcommittee of the Senate Ways and Means Committee will consider a bill this afternoon that was introduced by Sen. Herman Quirmbach, D-Ames, seeking to end the controversial tax credit program for film, television and video projects.However, full committee chairman, Sen. Joe Bolkcom, D-Iowa City, said he expects lawmakers will move to suspend rather than eliminate the program before the legislature adjourns.
"My judgment is that there will be an attempt that will get support to suspend the credit, either to a year from now or potentially for a longer period of time than that," Bolkcom said. "I think there’s more support to suspend than to completely kill the program."
Senator Quirmbach has pointed out that when you fund film credits, that money comes from somewhere:
"This last year, the (film) credits cost $38.6 million," he said. "For that kind of money, I could save the jobs of 1,000 teachers. You tell me what's more important to the future of Iowa: 1,000 teachers or having Meryl Streep come visit."
It's not just an academic question:
Elementary and high school teachers in Des Moines' schools would have more students in their classrooms next fall and youngsters in kindergarten through fifth grades would spend less time in art, music and physical education, under budget proposals unveiled Friday.The proposal calls for slashing an unprecedented $33 million from next year's budget and eliminates nearly 480 positions, most of them teachers.
The reductions affect every school and employee group, Superintendent Nancy Sebring said.
But think of what film credits can do for your state's culture:
Florida is considering changing its film and television tax credits to ban recipients from airing gay characters. That's right. The federal government is thinking about letting gays serve openly in the Marine Corps, but the state of Florida thinks there is something wrong with gays appearing on television. I guess anything with Ellen DeGeneres or Ru Paul is out.Current Florida law grants tax credits on productions considered "family friendly" - with no smoking, sex, nudity or profane language. Violence has been okay so far. Republican Rep. Stephen Precourt would increase the credit and expand the field of disqualified productions to those that include any "exhibit or implied act" of nontraditional family values and gratuitous violence. Precourt says that shows with gay characters would not be something he'd want "to invest public dollars in."
Surely our intrepid subsidized filmmakers wouldn't stoop so low as to sell out for a mess of pottage government cash? Well, the film industry is known for its integrity.
And think of the intangible economic benefits of the Louisiana film credits:
New Orleans Saints tight end Jeremy Shockey and former defensive lineman Charles Grant are suing ex-teammate Kevin Houser over investments worth hundreds of thousands of dollars tied to a now-defunct movie studio.Shockey and Grant paid for what they thought would be state movie industry tax credits returning $1.33 for each dollar they invested.
State officials say Wayne Read, the CEO of the bankrupt Louisiana Film Studios LLC, never applied for the credits and the money was never returned to investors.
Yes, who needs teachers? We can meet movie stars!
Related: Let them eat canapes
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=2041a681-d0d6-474c-a83f-bd3a942eda05)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Thanks for bringing home the tax money, Senator!
March 09, 2010
Tom Harkin was one of the best friends of CIETC, the so-called job training program that graduated three of its executives, including CEO Ramona Cunningham, to Club Fed on graft charges.
Now Senator Harkin has a new friend, reports the Des Moines Register:
Sen. Tom Harkin has secured millions of dollars in taxpayer money for an Iowa Association of School Boards program run by a longtime friend. The program has, in turn, spent millions with a company run by a major financial backer of the Democratic Party.
Funny how that works.
Overall, the program has received more than $40 million in federal grants, some of which were secured by Harkin, Iowa's Democratic senator.Throughout that time, there have been questions about the program's effectiveness and the no-bid contracts it used to pay for computer software.
Today, the school board association promotes Skills Iowa as "a special project by Sen. Tom Harkin." The program is led by Susie Olesen, a personal friend of Harkin who has an extensive background in education and curriculum development.
Senator Harkin likes special projects.
Ramona Cunningham and Senator Harkin at the dedication of the Harkin Learning Center at CIETC headquarters.
Like CIETC, the non-profit running this pet program is having a few management problems:
Two teams of auditors are going through records of the Iowa Association of School Boards. One of them is looking into allegations that:• Public money was used for a former executive's vacation to Bora Bora.
• Staffers not only kept board members in the dark about financial problems but actively misled them about a multimillion-dollar business deal.
• A for-profit company run by an association executive received $5 million from the organization.
In addition, the group's executive director has acknowledged collecting $59,000 in extra pay over the past eight months, but says she might have been "set up" by the association's chief financial officer. There are also allegations of conflicts of interest, nepotism, lax financial controls and inadequate board oversight.
It sure is good that Senator Harkin spends our money so wisely.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Do 'Amazon laws' backfire?
March 09, 2010
They just might, reports the Tax Foundation:
As more states consider enacting so-called "Amazon tax" laws to force online retailers to collect sales taxes, a new Tax Foundation report cautions that such policies would not only fail to relieve short-term budget problems but also hurt long-term economic growth.Click here to read the new report, "Amazon Tax" Laws Signal Business Unfriendliness And Will Worsen Short-Term Budget Problems, Tax Foundation Special Report No. 176.
The key findings:
* Frustrated by their inability to impose tax collection obligations on companies with no substantial connection to their state, several states are considering the adoption of "Amazon" tax laws. Such laws currently exist in New York, Rhode Island, North Carolina, and Colorado.
* An Amazon tax law requires retailers that have contracts with "affiliates"-independent persons within the state who post a link to an out-of-state business on their website and get a share of revenues from the out-of-state business-to collect the state's sales and use tax.
* Amazon taxes are unlikely to produce revenue in the near term. New York continues to face a lengthy legal constitutional challenge. Rhode Island has even seen a drop in income tax collections due to the law.
* Amazon taxes do not level the playing field between brick-and-mortar and Internet-based businesses because they require Internet-based businesses to track thousands of sales tax bases and rates while brick-and-mortar businesses need to track only one.
* Unconstitutionally expansive nexus standards like the Amazon tax undermine legal certainty, burden interstate commerce, and harm economic growth.
That won't stop revenue hungry states from trying more Amazon taxes.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=bf3d6dd8-18fc-4e02-8adf-23bad0b8ab99)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Will your NCAA pool winnings be taxable?
March 09, 2010
Gambling winnings are always taxable income, notes Stacie Clifford Kitts. You have to itemize to deduct losses, and some states don't allow losses at all.
Russ Fox is your go-to guy for your gambling tax issues.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Unintended consequences of the offshore crackdown
March 08, 2010
International tax lawyer Phil Hodgen files a report from his recent trip to Asia that should give us pause to consider how we deal with taxes of our offshore taxpayers:
Here’s what I’m seeing from my meetings:§ U.S. expatriates who ran afoul of the IRS’s FBAR Crusade are grumpy. (Seriously, who can blame them? A normal person, living a normal life outside the U.S., owing in some cases a trivial amount of tax, and for that the IRS wants to throw massive penalties at them?)
§ U.S. expatriates who are not (yet) fully compliant in reporting the existence of offshore bank accounts have no interest in coming forward due to the uncertainty as to how they’ll be penalized, and the current harsh penalty regime. Anecdotal or a trendline indicating how the IRS has trained a whole set of otherwise law-abiding people to deliberately lie on their tax returns?
§ An increasing willingness to give up U.S. citizenship. One of my reasons for coming to Asia this time was to meet with people who are launching the expatriation process. Anecdotal or a trendline? And if it is a trendline, what is causing productive, high achieving people to cut all ties with the United States?
§ Bankers are hesitant to set up and administer trusts which have U.S. beneficiaries. Anything touching the United States has highly complex accounting and paperwork requirements. Anecdotal or trendline indicating that the cost of doing business in/with the United States is getting too high?
The penalty regime for offshore tax reporting shoots jaywalkers to deter real criminals. When missing a reporting deadline by one day triggers an automatic $10,000 penalty, the incentives are for a late filer to not file at all in hopes the IRS doesn't notice. When you shoot jaywalkers to deter fraudsters, the jaywalkers might as well become fraudsters. With people abandoning U.S. citizenship in rapidly increasing numbers, it's time to re-evaluate the penalty system.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=62f6fa67-8181-45da-9577-77fe2920cba3)
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Well, it's the next logical step
March 08, 2010
"New Tax Credit to Incentivize Business to ‘Make Profit’" It's a parody so far, but the legislature's still in session.
Via Taxguru.net
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Deductions for cheerleading expenses?
March 08, 2010
TaxGrrrl says no, you can't deduct expenses for high-school cheerleading costs. In Iowa, though, you may be able to get a tax credit.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Start me up
March 08, 2010
When you start a new business, you can't start taking deductions until the "start up" phase is over and the business begins. You can deduct up to $5,000 of the costs in the year business begins, and the rest over 15 years. Stacie Clifford Kitts explains.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Dealing with preparers this time of year
March 08, 2010
As W-2s, 1099s and K-1s take longer to trickle in, tax season is becoming more and more a six-week slog. Kay Bell has some tips for dealing with harried preparers this time of year.
Link • Comments (0) • TrackBacks (0) Share & Bookmark
Weekend roundup
March 08, 2010
The Tax Update was less lazy than usual over the weekend, putting up two posts:
Second-guessing is so much harder than doing the actual work, where I respond to a Treasury union boss's assertion that government employees deserve higher pay because their work is so darn hard.
The repeal that dares not speak its name, where I talk about problems of the Iowa corporation income tax, and why it should go away.
Tax Updates
Subscribe to Tax Updates
The items included in the Tax Update Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation.
Joe Kristan writes the Tax Update items, and any opinions expressed or implied are not neccesarily shared by anyone else at Roth & Company, P.C. Address questions or comments on Tax Updates to
Search Tax Updates
Friends and Neighbors
Economics Nerds
Hard-Core Tax Nerds
Gigablogs
Insurance Folk
Goners
Legislation
Tax Update Data Feeds
