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Don't just take my word for it. Listen to Amity Shlaes, author of a ground-breaking study of how the government put the "Great" in the Depression, in a Tax Analysts piece ($link):
The greatest problem with tax incentives is that they distort the economy in ways that hurt us all in the long run. The tax deductibility employers enjoy when they buy health insurance for workers was first offered decades ago in the name of a righteous goal: encouraging those employers to provide coverage for uncovered citizens. But the third-party payment system that resulted provided a significant disincentive for doctors and patients to economize on healthcare. No one really knew who was paying, so no one took the costs seriously.
And they aren't cheap:
Removing all tax expenditures, from the child credit to estate tax breaks, would allow lawmakers to cut the top tax rate from 35 percent to 20 percent, as scholars Leonard Burman, Eric Toder, and Christopher Geissler pointed out in a recent Urban Institute-Brookings Institution paper. Or, to put it another way, eradicating tax incentives would make us enough to extend Medicare and Medicaid without cutting benefits.
There's a great example in the Sioux City Journal of how a tax credit for "green" vehicles works to take away what little exercise exists in a round of golf. The credit for "low-speed electric vehicles" has triggered a stampede to the cart dealers:
Some Siouxland golf cart dealers report a flood of interest from linksters wanting to tap a federal income tax credit that can slice the price of the machines in half or more. Out of stock, they're waiting for new orders to arrive.
"Our sales usually slow down this time of year when the weather gets nasty,'' said Jack Mills of Midwest Golf Car in Tea, S.D. "This year, our phones have been ringing off the hook. This has taken us by surprise and we're trying to meet the demand.''
Why the big rush? To qualify for the credit, which amounts to several thousand dollars, depending on the car battery kilowatt capacity, purchases must be completed by Dec. 31.
The credit is available for carts that are street legal, and they have to be faster than standard carts:
To qualify for the tax credit, the plug-in electric vehicles must have maximum speeds between 20 and 25 miles per hour -- nearly twice that of traditional golf carts.
"They're probably overqualified for golf courses, but that's probably where a lot of these are going to end up at,'' Mills said.
So when you pay your tax bill next April - and a lot of people will find themselves paying -- you can at least have the consolation that you are paying so some old guy at the country club could get a great deal on his own personal super-cart.
Photo attribution:
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Farmers can save taxes for the family by paying their kids, reports Farm CPA Today blog. He says an Iowa farm couple can save up to $8,300 in taxes by putting their four kids on the payroll. The savings come from using the kids lower brackets and because wages paid to farm kids aren't subject to FICA or Medicare tax. They also add this caveat:
Remember, the wages must be based upon actual work done and at a rate similar to rate charged for work done in a farm in your area. You should keep accurate records of the work performed and make sure that you follow all child labor laws for your state and region. Also, the savings may be less in a state where the wages paid to the child would make the income taxable for that state.
Farmers do work their kids, even into adulthood. I know grownup CPAs who go back home in the fall on weekends to help with the harvest. If you trust the kids with the money ("Hey, buy the car if you want, I'm redoing my will this week anyway and if you can afford that car, you don't need any inheritance."), you may as well save the taxes.
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I just noticed the "Iowa Fact Check" blog, "a collaborative 'fact-checking' blog edited by Simpson College students." Other than the disturbing use of quotation marks around "fact-checking," it looks like it could be fun to read as the Iowa Governor's race heats up. It appears to have been asleep since the end of the last Presidential campaign, but it awoke with "Governor Culver's New Budget Ad."
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The Tax Foundation has sent an open letter to Governor Culver and the members of his panel reviewing Iowa's tax credits. Their comments should be a roadmap for the panel:
A $10 million income tax credit for a special interest often receives less scrutiny than an otherwise identical $10 million appropriation. Boosters of tax credits, particularly wasteful and ineffective film tax credits, thrive on this lack of oversight. Requiring that each tax credit have a stated purpose and that each be evaluated annually for whether they are achieving that purpose is a valuable step for Iowa government.
Lawmakers in all states, trying to be mindful of their states' business tax climates, are often tempted to lure businesses with lucrative tax incentives and subsidies instead of pursuing broad-based tax reform. As they do so, redundant tax credits are often created and remain even after they serve no positive purpose. Further, while officials roll out the red carpet for new businesses, existing in-state employers are taken for granted and are stuck paying higher taxes.
A far more effective approach is to systematically improve the business tax climate for the long term so as to improve the state's competitiveness, by repealing all incentives and subsidies. The tax code would thus be used just for raising revenue, not for changing economic behavior. While a review of state tax credits won't achieve these goals right away, it is a positive first step toward informing tax code choices. We thank you and your officials for your action and are ready to assist however we can with our data, analysis, research and state comparisons on state tax credits.
What they recommend sounds a lot like the Tax Update Quick and Dirty Tax Plan. Sadly, many folks have become accustomed to corporate welfare via the tax system, so it will be an uphill battle.
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The TaxGrrrl, an excellent tax blogger, has been audited, and lives to tell the tale. She has some great advice, all worth reading, but I think this bit may be the best:
Be nice. I know, I know. But hear me out: your mother was right about this. A little bit of kindness can go a long way.
Yes, the system is adversarial. Nobody is excited about paying taxes. And the mission of the IRS is to collect taxes. So, there you go: problem from the start.
But taking the position that you won't cooperate isn't helpful. In fact, it's just the opposite. Think about it… what kind of frame of mind are you in when someone is rude to you? Do you think, "how can I help this person?" or do you think, "how can I teach this person a lesson?" Right.
The agents have a job to do, whether you agree with their position on the issue or not. And in my line of work, it's all too often that I don't agree with their position. But it doesn't help to be a drama queen – or worse, a martyr. It simply complicates an already unpleasant and awkward situation. Remember, neither one of you wants to be at that table. So be nice. The time will go much faster. And your mother will be proud of you.
If you make the agent hate you, do you really think she will take a pass on your iffy deduction?
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One of the candidates for Iowa Governor has proposed a repeal of the state's corporation income tax. Excellent news. It's hard to imagine a worse tax policy than having the highest rate in the nation, but with so many loopholes that it collects a pittance in revenue.
Now if we can just get the rest of the Tax Update Quick and Dirty Iowa Tax Reform Plan into the debate.
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The supergeniuses in the Iowa legslature and Terrace Hill have dug a billion-dollar hole in the state budget. Good thing we still have film tax credits, maybe to the tune of $363 million.
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When you start a business, you are choosing a business entity, whether you know it or not. Chris Branstad tells how to get it right the first time at IowaBiz.com.
You should get your tax pro involved. If you aren't sure what to do, but need to do something, do something that you can easilty undo. That means a sole proprietorship if you are a sole owner (a single-member LLC will do) or a partnership (including an LLC) if you are a co-owner. Don't go with a corporation -- S corporation or C corporation -- unless you really are sure of what you are doing. Once you incorporate, you may find yourself with taxable income for the privilege of undoing it.
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The Tax Update hits the road for the holiday. Here's wishing you a great Thanksgiving! Remember to then take the nice outfit you bought during Iowa's sales tax holiday for apparel to South Carolina for this weekend's sales tax holiday on guns!
Flickr photo by k@t marsh
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Kay Bell reports that some congresscritters are pushing a surtax to allegedly cover the war, with the catchy slogan "pay as you fight." Joseph Thorndike flogs the idea at Tax.com. The TaxProf rounds up the coverage.
Of course cash is fungible, and the "war tax" proceeds can be spent anywhere. From the nature of the congresscritters involved -- all liberal Democrats -- funding guns and ammo isn't likely the goal here. And no war has ever been "pay as you go," as the peaceful poster below attests.
The bill is officially called the "Share the Sacrifice Act." Dedicated taxes like this are unworkable as a matter of policy, but if they think this is such a great idea, why is it a good idea just to pay for war costs? It might be a good idea to have a dedicated "Share the Sacrifice" tax for every new program. The possibilities are endless:
- A "Give it up For Goldman" tax to finance TARP and the bailouts.
- "Reach Deep for Realtors" to finance the extended homebuyer credit.
- A "Pimp your Neighbor's Pickup" tax to finance "Cash for Clunkers."
- "Pay up for Pork" for any transportation bill.
- A "Share the Stupid" tax for the stimulus spending.
In Iowa, we could have a "Fork it over for Films" or "Bill me for Benzes" to finance the Film Tax Credit.
If they really think this is a good idea, lets apply it across the board! Otherwise we might have to conclude that the war tax is an unserious and cheap political ploy, or just another way to take more of our money.
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Deductions for fixed assets -- depreciation and Section 179 deductions -- don't necessarily start when you buy an asset. They are only available when the asset is "placed in service." This can be a weapon for the IRS to delay deductions for assets that may be on the premises, but haven't been put into operating shape.
A taxpayer yesterday showed the IRS that trick can work both ways. Courtney Brown was an electrical engineer with a specialty in recording equipment and dreams of going into business. He bought some equipment and tinkered with it for months. Finally he felt it was working the way he wanted in 2004, so he quit his day job and opened his own recording studio. He claimed a Section 179 deduction -- the deduction that enables taxpayers to write off currently equipment costs that otherwise can only be recovered over a period of years through depreciation -- of $22,832 for his equipment.
The IRS came auditing, and things ended up in Tax Court:
Petitioner purchased the equipment from 2002 to 2004 for use in his studio recording business. Petitioner contends that the equipment was not used until 2004 and was therefore placed in service that year.
Respondent contends the equipment was placed in service in 2002 and 2003 because petitioner tested some pieces of equipment before 2004. Respondent argues that the equipment was thus ready and available for its specifically assigned function at that time. We agree with petitioner.
Judge Gerber explains the rules (citations omitted):
Individual components are treated as a single property for tax purposes when they are functionally interdependent. Regardless of the amount of testing petitioner performed on each individual component, the equipment was not capable of performing its assigned function until interconnected and capable of supporting the operation of the studio. Each piece of equipment was thus essential to the operation of the studio as a whole and was not useful or able to be used to operate a business by itself.
That's a taxpayer victory here, but it also implies a warning to taxpayers: if your machinery is still in shipping crates needing to be put together at year-end, it's probably not yet eligible for depreciation or Sec. 179 deductions. If you want the deduction this year, get it out of the box and hook it up!
Cite: Brown, T.C. Summ. Op. 2009-171
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After losing his first court battle against a claimant of the Iowa film credits, Attorney General Tom Miller threw in the towel, at least with respect to the 22 or so films already approved for tax credits.
The attorney general is giving up ground he can't hold. It will be more interesting to see if he can hold out against the much larger number of projects that are "registered" for the credits, but whose applications haven't advanced as far as the ones that will now get their $32 million in transferable tax credits from the scandal-plagued program. If not, the $10-per-Iowan cost could soar to $121 per Iowan.
Related: Buy them a Benz and they will come!
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TaxGrrrl, an actual tax lawyer, is being audited, and will blog it. It should be great blogging material, but that's a tough way to get it. I hope auditing tax bloggers doesn't become a trend.
Fellow tax lawyer Peter Pappas has some comments.
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A federal jury yesterday convicted three men of a $9 million tax-protest type tax fraud. One of the convicted defendants was Joseph Saladino, who has been fighting the IRS, unsuccessfully, for a long time. They were convicted of preparing returns that deducted the "value of labor" on tax returns to zero-out taxable income.
Once when Mr. Saladino was ordered to put a copy of an injunction against him on his website, he added this defiant statement to the site:
If there was "no evidence of fraud" before, the IRS found some. While the judge has some "discression" in imposing a sentence, federal sentencing guidelines recommend a 63-78 month sentence for a $9 million tax loss. As a guest of the "goverment," he will find his freedom and privacy sadly limited. But as his web site used to say,
If you try to use tax protest theories, it helps not to need those things.
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The IRS has released (Rev. Rul. 2009-37) the updated interest rates for amounts owed by and to the IRS for the three months begining January 1, 2010. They are unchanged from this quarter:
* four (4) percent for overpayments [three (3) percent in the case of a corporation];
* four (4) percent for underpayments;
* six (6) percent for large corporate underpayments; and
* one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.
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Eager and happy tax practioners raptly follow my presentation this morning at the Muscatine edition of the Iowa State University Center for Agricultural Law and Taxation Farm Tax School.
If you haven't signed up yet (and why not?), you can still sign on for the Denison and Ames schools!
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The Bleeding Heartland Blog has some predictions on the results of the Governor's review of Iowa's corporate welfare tax credit system:
The film tax credit is a goner in my opinion.
The research and development tax credit may well be revised to force more disclosure by companies that benefit.
I wouldn't bet against the ethanol and biodiesel industries, which will fight like crazy to retain their tax credits.
I fear she may be too optimistic.
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Forget all this stuff about the World Trade Center, weapons of mass distruction, Dick Cheney's evil machinations, or the other explanations for the far-east wars. We're really at war for the convenience of the IRS!
Okay, I don't really believe that, but tax defense attorney Jack Townsend puts forward a disturbing but credible case that the criminal statute of limitations is kept open as long as we're there as a result of an obscure war powers statute. If I understand correctly, this wouldn't affect the civil statute of 3-6 years, which the IRS is having some troubles with.
The TaxProf is also on the case.
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Actor Wesley Snipes, who has been free while appealing his three year failure-to-file sentence, tells an appeals court that he should go free. His lawyers argue, among other things, that the sentence is too harsh and that the trial court should have held a hearing about moving the trial to New York. Mr. Snipes shouldn't put to much on his calendar before 2014.
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I added a few new (to me) tax blogs to the blogroll on the right side of your page, updated a couple of broken addresses, and took down some that have been silent for at least two months. If you have a tax blog and post regularly, and I've missed you, let me know in the comments or by e-mail and I'll get you on the blogroll.
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From a review of the new book From Poverty to Prosperity: Intangible Assets, Hidden Liabilities, and the Lasting Triumph Over Scarcity, by Arnold Kling and Nick Schulz:
Amar Bhide on what a government can do to promote entrepreneurship: make the basic governmental functions work. Property rights, provision of roads, water, electricity. (BC: Simple, but so true. Screw incentives, tax breaks, etc. Just do the basics.)
Amen. So adopt the Tax Update Quick and Dirty Iowa Tax Reform Plan, already. And put this book on your holiday wish list. I have.
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Update, 5/6/2010: IRS allows automatic relief for late NOL elections.
The IRS yesterday cleared the way for taxpayers to claim loss carrybacks for up to five years for 2008 and 2009. Rev. Proc. 2009-52 will be good news for taxpayers who were ineligible for the 5-year carryback allowed for 2008 losses for smaller taxpayers, allowing them to get additional refunds based on their 2008 losses.
The news isn't all good for taxpayers, though. The new guidance says that taxpayers who were eligible for the 2008 carryback, but who missed the deadline, must choose between 2008 and 2009 losses for the five-year carryback. This appears correct under the law as written, but it will be a disappointment for those who may have missed the 2008 deadline. Taxpayers whose losses came from companies that were too big to qualify for the 2008 loss carryback also must choose between 2008 losses and 2009 losses for the extended carryback. In contrast, Taxpayers who properly elected the five-year carryback for 2008 will also be allowed the extra carryback period for 2009 losses.
Basics of the new rules
The recently signed unemployment extension bill (PL 111-92) allows most taxpayers to carry back net operating losses 3, 4 or five years back, instead of the standard two years. Unlike the 2008 five-year carryback rule, the new rule is not limited to taxpayers with gross receipts under $15 million. Carrybacks under the new law for AMT are not limited to 90% of the AMT income for the carryback year. All losses carried back to the fifth year can only offset 50% of that year's income; losses carried back 3 or 4 years are not so limited.
Making the Election
The election is made by a statement attached to the taxpayer's return or carryback claim (Form 1045, Form 1139, or an amended return) with the following information:
- Statement that taxpayer is electing to apply Sec. 172(b)(1)(H) under Rev. Proc. 2009-52
- Statement the taxpayer is not a TARP recipient or affiliate of a TARP recipient.
- Statement of the length of the carryback elected (3, 4 or 5 years).
- If the taxpayer has already filed a carryback claim for 2008 --for example, for losses that didn't qualify for the five year carryback under the $15 million gross receipts rule -- add a line to the statement identifying it as an amended carryback claim.
- If the taxpayer previously waived the NOL carryback for 2008, the statement should also say that the taxpayer is revoking the waiver of the carryback period.
Watch the Deadline!
Normally taxpayers have three years to file an NOL carryback claim. Taxpayers normally have one year after the end of the loss year to file the expedited carryback claim on Forms 1045 or 1139. But taxpayers who want to claim the five-year NOL under the new law have to make their election by the due date of the 2009 return, taking extensions into account. This will lead many taxpayers to file extensions to allow more time to prepare the carryback.
Additional thoughts
Once again Congress has passed a poorly drafted tax provision. Basing a carryback deadline on whether a return is extended, instead of using the normal three-year NOL carryback deadline, is a chintzy way to limit revenue loss. It will punish earnest or poorly advised taxpayers for filing without an extension; filing with no extension will shorten the NOL carryback deadline by six months, to March 15 or April 15, 2010. It's also cheesy to prevent taxpayers who missed the 2008 deadline from correcting their mistake so they can carry back both 2008 and 2009 losses. It's hard to see a policy argument for this, unless Congress thinks its important for taxpayers to learn to adapt quickly to random tax law changes.
The TaxProf has more.
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Governor Culver has formed a panel to review Iowa's 30-odd business incentive tax credits. He sent a letter to some of his agency heads:
To assist the panel with their work, I am asking you to submit information on your respective departments' tax credits to the Iowa Department of Management by close of business December 4, 2009. Submissions should include the following information for each tax credit program administered by your agency:
• General description of the purpose of the tax credit
• Minimum, maximum and average value of tax credits issued
• Contingency liability for each tax credit
• Number of tax credits issued each year
• Number of individuals and/or businesses served by the tax credit
• Whether the tax credit is transferable and, if so, how many times
• Whether the tax credit is refundable
• Processes for oversight and regulation of the tax credit
• The Return on Investment for the tax credit
• Data on the fiscal impact of the tax credit for the past ten years, if available
• A description of what information is currently made available to the public for the tax credit(s) administered by each agency.
Good luck computing the "Return on Investment" on the tax credits. Those numbers don't exist. They will "estimate" them, which is another word for "make it up." The agencies will assume that every job at a company receiving a tax credit would never exist without the tax credit. They will ignore the economic activity lost to the rest of the state when they take that money from you and me and give it to somebody with a good lobbyist. And they'll insist that every credit is vital to keep the state from flowing down the Mississippi.
It never makes sense to take money from some businesses and their employees to lure and subsidize their competitors. Far better to embrace the Tax Update Quick and Dirty Tax Plan.
UPDATE: A reminder: IPTV's Iowa Journal recently did a program on tax credits (video at link). On the program Rep. Shomshor says they're always evaluating whether credits are cost-effective. Now the Governor makes it sounds like a cost-benefit evaluation of tax credits is a new thing at the Statehouse. Sadly, the Governor is right, not Mr. Shomshor.
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Tax Policy Blog has a handy summary of how Harry Reidcare will allegedly be financed. Peter Pappas has a nice summary of some of the more baleful provisions of the bill, including a sexism angle. One of the taxes in the bill applies to cosmetic surgery, which Mr. Pappas calls "...a vanity tax that will fall disproportionately on women. Why don't we tax nostril hair tweezers and toupees while we're at it?"
Kay Bell also has a roundup of the tax provisions.
TaxVox comments wisely:
It may not really pay for the cost of insurance reform over next decade, but it will pass muster with the scorekeepers. And in Washington these days, that's all that matters.
It's unpopular, unworkable, and insane, so naturally they're in a hurry to pass it.
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It's good to watch a fight when you don't have to pick sides, and you can enjoy every blow. For example, H&R Block Tax Services Inc. v. Jackson Hewitt Tax Service Inc.; No. 6:08-cv-00037. Go to it, guys!
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Sometimes a great idea in the lab doesn't work so well in the field.
George Yin, former Chief of Staff of the Congressional Joint Committee on Taxation, thinks temporary legislation -- such as the perpetually-expiring AMT patch and research credit -- is a good thing:
Consequently, enactment of temporary-effect rather than permanent legislation would promote more political accountability and may result in greater fiscal restraint. In addition, when temporary-effect legislation expires, the legislative process fully takes into account the cost of any extension. Extension of such legislation, therefore, competes with, and potentially displaces, adoption of other legislation. By contrast, the cost of continuing permanent programs largely disappears in the legislative process, and therefore continuation of such programs produces little or no crowding-out effect.
Here's how that's working out in the field, as reported by Tax Analysts ($link):
The House Ways and Means Committee will likely approve renewals of the full set of so-called tax extenders, panel Chair Charles B. Rangel, D-N.Y., told reporters November 19.
Rangel said he was embarrassed not to let at least some of the incentives expire as scheduled but said the committee lacks the time this year to hold hearings on the matter.
"It would really cause more of a problem in excising them with this short period of time we have," Rangel said. "We can't just say we don't like [extenders]. We have to ask you to justify why it's in the code."
So much for accountability and fiscal restraint. Charlie Rangel is just too darn busy.
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The new Cavalcade of Risk is up at Healthcare Economist!
Among the many useful insurance and risk management posts there is the InsureBlog's explanation of the hidden link between heart attacks and double-decker buses. I would have suspected double-decker cheeseburgers, myself.
Speaking of risk management, Lara Utter gives you a checklist for a business insurance checkup at IowaBiz today.
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The Iowa Fiscal Partnership has generated some headlines by passing around their take on a new study by The Institute on Taxation and Economic Policy:
Study says Iowa tax system unfair to poor
Report: Iowa tax code favors wealthiest residents
Report: Iowa tax system hurts low and moderate income families
The report covers all 50 states. It ranks the 10 most-regressive systems (Iowa isn't one of them) and, interestingly, holds Delaware, D.C., New York, and Vermont as models of progressivity. Delaware is a special case because of its status as a state of choice for out-of-state businesses. The other three "progressive" states are ones that have horribly complex, anti-business tax systems that hurt the poor by driving their employers away.
The study begs the question of how "progressive" (and to ITEP, "progressive" = "fair") state tax codes can be. The rich are mobile. If Iowa beats up on the rich, they can relocate to Florida or South Dakota. If California clobbers the rich, Texas and Nevada beckon. It hardly seems "fair" to the poor when a state drives out their "rich" employers with high taxes.
As California has learned painfully in the current recession, tax systems that lean too hard on the highest earners are also very volatile. By spreading the tax burden over a broader population, a state makes its revenues more stable, but it loses "fairness" points with ITEP.
No, states shouldn't clobber the poor. But state tax policy based on "fairness" as defined by ITEP creates problems that are worse for a state than those they try to cure.
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As part of his 2000+ page nightmare of a "health care" bill, Senate Majority Leader Harry Reid would partially decouple the "Medicare" portion of the healthcare tax from the tax withholding system. For the first time the Medicare tax would be different for taxpayers with different filing statuses. The bill isn't available on the Senate Finance web site yet, but Tax Analysts has posted a copy of the bill as "circulating." ($link) (UPDATE: WSJ has posted it here.)
The bill (Sec. 9015) would increase both the employer and employee Medicare tax by .5%, to 1.95%. It would require employees to pay the employer share of the Medicare tax if the employer didn't. And it would require employees to compute and pay Medicare tax on their 1040s. The surtax applies to single filers at $200,000 of wage income and $250,000 of joint income.
The way I understand the bill, if two married lawyers each make $150,000 in W-2 income, they would have to pay the 1/2% surtax on $50,000 -- even though they individually wouldn't be subject to the surtax. It wouldn't be withheld by their employers because they are individually under $200,000. There would have to be a new form to compute this tax. I also read the bill to not impose a matching employer tax, which is unlike the current version of the Medicare tax.
The Tax Policy Blog has a summary of the revenue provisions of the Reid monstrosity, which will have to be wed to the Pelosi debacle before a final health care nightmare can pass. It's unlikely to acually help healthcare in America, but, as it doesn't change the Medicare tax exemption for S corporation income, it will ensure continued interest in the John Edwards tax shelter.
UPDATE: Greetings, IBD visitors!
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Reuters Headline:
Nearly 15,000 Americans admit offshore tax cheating
They are talking about the response to the recent IRS offshore amnesty. No doubt there were plenty of true tax cheats in the bunch, but many amnesty participants -- and all of the ones I'm familiar with -- aren't tax cheats at all.
The amnesty allowed taxpayers to file the "FBAR" disclosure of foreign financial accounts to avoid the horrendous 50%-of-the-account-balance annual penalty. This penalty applies whether or not you have undisclosed income. In many cases, it applies even if you don't own the account. For example, a payables clerk with signature authority over her employer's Canadian bank account is required to file FBAR disclosures. Most of the disclosures we had were of this sort.
Other filers were students who spent time overseas or executives with temporary overseas postings who opened bank accounts while offshore to pay day-to-day bills. If the account balance went over $10,000 during the year, the tax law in its majesty hits them with the same 50% penalty for non-filing as the worst UBS tax evader. The largest amount of unreported income I saw was $200.
The Moral: Beware lazy headline writers.
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The Tax Court says so.
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A Polk County judge told Iowa that it will have to give up to $6.5 million to a Canadian film company. Iowa Eye will get the credits for its film "Clean Out," which is one of 23 films with "recognized" contracts that were put on hold when Iowa's film credit program ground to a halt in scandal and corruption in September.
There are some open questions, including what the new review process will be for approving expenditures for credits, and who will do it.
Iowa may appeal the decision, but it's not clear they have a straight-faced argument to not hand out the film welfare checks under the current statute. The real questions:
- Will Iowa have to give credits to the over 100 films that have registered for the credit but who do not have "recognized" contracts?
- Will films that don't get made be able to collect damages from Iowa for putting the program on hold?
The state has already blown over $30 million on the program, or about $10 per Iowan. The cost of the films in the "recognized contract" category, like "Clean Out," may be another $78 million. The film credit price tag could rise as high as $363 million if both questions are answered "yes."
Thanks, legislators!
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Headline in today's Des Moines Register:
Could local-option tax give Des Moines metro area a lift?
The Des Moines City Manager, Rick Clark, "wants to explore whether a 1-cent sales tax could help reduce property taxes in the capital and complement other fees the city charges to finance local government."
Last time they tried this, 85% of the voters said no. When it's 85%, that really means no.
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Mary O'Keeffe thinks maybe so; Peter Pappas thinks not.
It probably is unwise to compensate for normal audits. They're a cost of doing business. If the IRS audits you twice in a short period with no changes, I would argue otherwise. The strongest case for paying audit victims is when the IRS does a "research program" audit; there the purpose isn't so much to raise revenue as to develop statistics. At least they could give a free dinner at Applebees or something.
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There's a new roundup of tax blog posts at Robert D. Flach's place. Meanwhile, Kay Bell has a new "Tax Twitter Tuesday" up, with tax tweets from all over.
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$50 billion in federal subsidies isn't enough for
Government General Motors. Michigan is now throwing in another $2.6 million to keep the world's largest manufacturing zombie from from moving jobs from Downtown Detroit to... "other Detroit-area facilities." GM will happily take the money, but may welsh on the jobs part:
GM's Eric Henning, vice president for state and local affairs, told the MEGA board Tuesday that no final decision has been made about transferring workers from the Renaissance Center to other Detroit-area facilities. The company needs flexibility, he said, and did not believe the minimum staffing level was to be part of the agreement.
After the MEGA meeting, Gov. Jennifer Granholm and her economic development chief clarified that the 2,500 figure is negotiable "but GM must maintain a significant presence."
It boggles the mind that a state government would pay a company to not move jobs within the state. It's the kind of governance that makes Michigan the nation's leader -- in unemployment, with a 15.3% rate.
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The IRS has issued (Rev. Rul. 2009-38) the minimum required interest rates for loans made in December 2009:
-Mid-Term (loans from 3-9 years): 2.64%
-Long-Term (over 9 years): 4.17%
The Long-term tax-exempt rate for Sec. 382 ownership changes during December is 4.16%
Historical AFRs are available at the "links" page at www.rothcpa.com. You can also click here for the rates for prior months as reported in the Tax Update.
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It's a holy grail of tax planning: a tax strategy that prevents you from paying additional tax even if the IRS adjusts your return on audit. A South Dakota estate has achieved something close to that.
Helen Christiansen owned South Dakota ranch properties at her death. Her will gave her property to her only child, a daughter, but it had a "qualified disclaimer" provision. If the daughter declined any of her inheritance, it would go to a charitable trust and a charitable foundation. The daughter cleverly disclaimed any amount over $6.3 million as "finally determined for estate tax purposes.
The IRS audited Ms. Christiansen's Form 706 estate tax return. The auditor increased the value of some of the property reported on the return. The executor said fine; because the daughter's share of the estate was still the $6.3 million "finally determined for estate tax purposes," the increase in the taxable value of the estate just increased the amount going to charity, and the charitable deduction.*
The IRS didn't like this. They argued that the estate tax audit was a post-death event that shouldn't count in determining the charitable deduction. They also argued that if they increase the value of property of property shown on an estate tax return, they should get additional tax for their trouble. Otherwise, what would be the point of auditing such a return? (And who says incentives don't matter?)
The Tax Court, in an opinion worth reading just for fun, held for the taxpayer. Last Friday the U.S. Court of Appeals for the Eighth Circuit, which includes Iowa, agreed:
For several reasons, we disagree with the Commissioner's argument that we must interpret the statute and regulations in an effort to maximize the incentive to audit. First, we note that the Commissioner's role is not merely to maximize tax receipts and conduct litigation based on a calculus as to which cases will result in the greatest collection. Rather, the Commissioner's role is to enforce the tax laws
Of course, the result doesn't make the IRS go away. While the IRS got no more as a result its audit, the charity got more property at the expense of the daughter. But if a goal of your estate plan is to limit what goes to the IRS while giving to charity once you've taken care of your children, this "Charitabile LID" plan could be very attractive. Roger McEowen has posted an excellent analysis of Christiansen and its planning implications.
Eighth Circuit decision
Tax Court decision
*A technical problem with the trust apparently disqualified it from being eligible for a charitable deduction on the estate tax return, so the IRS did get some tax under the facts in the case, but they would have gotten nothing absent the techncal problem.
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When the Patriots went for it on fourth down Sunday night and failed, I thought it was the right decision, even though they lost. It just looked bad because New England lost the game, but the alternate reality is unseen -- the (high) probability going in that they would have gotten the two yards, sealing a victory, plus the unseen (but reasonably high) probability that Indianapolis would have gotten a touchdown anyway after a punt, vs the (seen) consequences of failure on fourth-and-two. Usually New England gets the first down; Belicheck just rolled snake-eyes this time.
The Tax Policy Blog had the same thought. Which may make me unfit to watch football games with anybody.
UPDATE: OK, I can still watch games with the TaxProf. (Via Going Concern).
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If this is what happens when you go metric, count me out:
Tax By the Kilometer: A New Meaning to "Going Dutch"
Dutch drivers to face per kilometer tax
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You've stolen some money from your customers. The hounds are closing in. Is it time to contact a lawyer, take your lumps, and move on as best you can?
Perhaps. A California man took another path, burning down a warehouse with $200 million of wine entrusted to his safekeeping. Russ Fox outlines how that worked out for our embezzler.
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Kay Bell rounds up a flurry of recent coverage of issues on the taxation of body parts.
While the tax angle is interesting, it's a side issue. The real story is the flat-out ban on compensated organ donation, enacted largely through the efforts of a younger, trimmer Al Gore in 1984. Thanks to Mr. Gore, people die every day waiting in vain for donor kidneys - tens of thousands since the ban was enacted. Give that man a prize.
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Trouble is brewing in Mason City, the model for "River City" in "The Music Man." It's scary enough that the Iowa State University Center for Agricultural Law and Tax School here today -- with me, the IRS, Roger McEowen and 160 hard-partying accountants ready to wreak their customary mayhem in the town's tattoo parlors and karaoke bars. But now, says the Chicago Tribune, Mason City has a billboard controversy:
MASON CITY, Iowa - A billboard in Mason City that feature a definition of socialism accompanied by the phrase "Obama-nation" is drawing complaints.
Mark Tlusty of Rockford spent about $400 to display the sign for a month. He represents a group called Concerned Citizens and helped organize an April anti-tax protest in Mason City.
The offending billboard, in an exclusive Tax Update photo:
It hasn't gone unnoticed:
Kathleen Wild of Mason City complained that the sign gives the appearance that residents are intolerant.
Intolerent? Incoherent, maybe. But are you supposed to be "tolerant" of socialism?
Whatever you think of the billboard, you can still sign up for the remaining tax schools in Muscatine, Denison and Ames!
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Banks hate credit unions. Nobody likes competition, but tax-exempt competition can be truly annoying. That's why both banks and credit unions will be interested in a tax case playing out in a Colorado federal district court.
The IRS is trying to assess the Bellco Credit Union for "unrelated business income tax," or UBIT. This tax is a version of the corporate income tax. It is imposed on business activities of tax-exempt entities "unrelated" to their tax-exempt mission. It shelters taxable businesses from unfair competition from tax-exempt entities.
The credit union asked for "summary judgement" that a number of its activities were non-taxable as a matter of law. The court ruled for the credit union on a few items, but against it on one, and it set others aside for a full hearing.
The court ruled that financial services income -- such as brokerage fees and commissions -- were tax-exempt when earned from credit union members. Such income is subject to UBIT, according to the court, when earned from non-members, with no "de minimis" exception.
The court also held that UBIT applied to a 4% interest that the credit union owned in "Member Gateways," which was apparently a partnership owned by a group of credit unions.
The court will hold a full trial on whether income related to credit life and disability insurance products is subject to UBIT.
The court had to decide whether the decision will be up to a jury. In deciding that it is a question for a judge, rather then a jury, the court said:
As a threshold matter, technical tax determinations are not typically within the "common experience" of jurors -- if they were, thousands of accountants would be out of a job.
We can't have that, can we?
Bellco Credit Union; DC: Colo., No. 08-cv-01071-CMA-KMT. Tax Analysts subscribers can access the case here.
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Russ Fox explains how Iowa cuts itself in on the winnings of out-of-state players in Iowa poker tournaments.
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Last week an appeals court struck down a "midco" tax shelter for lacking economic substance. Tax criminal defense lawyer Jack Townsend asks whether it might have been not just a blunder, but a crime.
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I'm quoted in Saturday's Des Moines Register on how the Homebuyer Credit makes me think of bell-bottoms. But at least in the 70s, we had drugs as an excuse.
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TaxGrrrl brings the shocking news that Zsa Zsa Gabor is 92 years old. Oh, and she has six-figure IRS leins on her, and Bernie Madoff took her for $7-10 million. Plus: an Anna Nicole Smith angle!
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Earlier this week we posted the Tax Update's Quick and Dirty Iowa Tax Reform Plan. We've received a few comments and no hate mail, so we'll repost it below for our readers to ponder on Friday the 13th.
The meltdown of the Film Tax Credit program illustrates the inherent problems of economic development tax credits. Iowa's subpar economic performance over the years in spite of its array of tax credits illustrates their futility.
It's time for Iowa to take a new approach to become attractive to all businesses, not just those with good lobbyists. Not only will it eliminate the opportunities for corruption built into tax-credit programs, but it will save Iowans millions of dollars and hours in tax planning and prep fees.
The Pieces:
1. Eliminate the Corporation income tax. The Iowa corporation income tax has the highest stated rate in the country, and one of the highest effective rates. The only reason it doesn't destroy Iowa's economy altogether is that it is so riddled with loopholes that collections are very low - well under 5% of the state budget. Yet it is a very expensive tax to administer and to comply with. Eliminating the tax would send a powerful message to companies looking for a place to invest for the long term.
2. Reduce the Iowa individual income tax to 4% or less. 3.99% would be much more attractive to entrepreneurs and executives considering Iowa locations. It would bring our rate decisively below all of the border states except for Illinois and South Dakota. Only a low rate will enable Iowans to give up the large number of special breaks that make compliance and tax administration expensive.
3. Strip down the Iowa tax law. To get the rate down to this level, Iowa will need to strip its tax law of a host of politically-motivated tax breaks. These include, among others,
- All economic development tax credits - ethanol, films, R&D, "targeted" jobs and the like, they all should go. Low rates are more important than any of these, all of which serve primarily to fund the well-connected.
- The deduction for Federal income taxes. If the rates are low enough, the deduction doesn't matter nearly as much. If its built into the rates, you protect poorly advised taxpayers who have a big once-in-a-lifetime income item - say, from selling a business - and losing the value of the deduction by paying the tax when it is due, rather than prepaying in the year of sale.
- The exclusion for ten-year capital gains.
- The credits for tuition funds, community foundations, and the like.
- The special pension and tuition breaks for old folks. Any breaks for poor folks should be in the form of a generous low-income exemption. Old folks with low income aren't necessarily more worthy than younger folks. In fact they often are much more wealthy than their younger counterparts.
Just because a break isn't mentioned here doesn't mean I want to keep it.
4. Make federal taxable income the starting point for Iowa taxable income. If you use federal AGI as the starting point, you can achieve even greater simplification and lower the rates further. (Unmodified AGI as a tax base can create grossly unfair results, but it if you allow a deduction for gambling losses and Schedule A investment interest, you get a decent base). Federal changes in income computation would automatically be incorporated in Iowa's tax code, absent a vote of the legislature otherwise. It also makes Iowa's tax forms potentially postcard-sized.
5. Make Iowa's tax forms into a reconciliation format, starting with Federal taxable income. Have lines to back out federal Treasury income, which the state can't tax. If Iowa chooses to tax muni bond income, have a line for that. Have one last line for all (any) other addbacks and subtractions, which would feed from separate detail schedules.
6. The most difficult issue is taxation of S corporations. I would allow S corporations to elect to be Iowa C corporations and make Iowans taxable on distributions from the corporation as if they were C corporations. Electing corporations would have to report distributions to Iowa shareholders to the state, and the shareholders would be taxed as if the distributions were taxable dividends; otherwise electing corporations would pay no tax on Iowa-source income. Iowans owning Non-electing S corporations would be taxed in Iowa on all their S corporation income. This would achieve near-parity between Iowa C and S corporations.
These proposals do not have revenue projections. The idea is to not reduce Iowa's tax receipts. This is an attempt to provide a target, an ideal for improving the system. I would love to see what the revenue projections would be. Unfortunately, unlike IRS, Iowa doesn't release any statistical information that would enable us to make those kinds of estimates.
Whatever the projections would be, I have no doubt that "no corporate taxes and low individual rates" would be better for Iowa's economy than "high taxes with lots of loopholes for those with connections and lobbyists."« Close It
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Not compared to this:
This chart, produced by the libertarian Ludwig von Mises Institute (via the TaxProf), illustrates hidden taxes that occur at lower income levels. Their illustration, featuring a hypothetical single Virginia parent with two kids, treats the loss of means-tested welfare benefits as income increases as a "tax." The loss of benefits such as the Earned Income Credit, food stamps, Medicaid, and Section 8 housing subsidies exceeds 100% of income over most of the income range from $20,000 to $45,000, according to the Institute.
Unless something is badly wrong with the chart, something is badly wrong with our public policy. It's more likely the public policy. What to do? Arnold Kling says:
There are two potential solutions. One solution is to base eligibility for means-tested benefits on total income, including other government benefits programs. Another approach would be to abolish a lot of specific programs and replace them with generic cash assistance.
Maybe some of both.
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As newspapers struggle to cope with the age of blogs and Craigslist, proposals are going around to treat them as charities. Tax Vox has a great piece on why this is a terrible idea, but this may be the best point:
The authors would make "news reporting" an exempt purpose under the Internal Revenue Code. Do we really want the IRS defining "news reporting?" This gives me serious chills.
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Warren Buffett likes to say that his secretary pays taxes at a higher rate than he does. As Peter Pappas explains, Warren is missing a big hidden tax -- the 35% corporate tax paid on corporation income before it is passed out to Warren as dividends.
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...reward their worst customers:
The Federal Reserve today announced new rules that will ban banks from charging overdraft fees on debit card and ATM transactions unless a consumer opts in to an overdraft program.
"The final overdraft rules represent an important step forward in consumer protection," Fed Chairman Ben Bernanke said in a statement. "Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service."
Apparently the government has decided that if they can spend money they don't have, everybody else should be able to.
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So many things can go wrong with this:
The Quebec government is cracking down on tax evasion in the restaurant business.
The province's revenue minister has introduced standardized cash registers that must be installed in every restaurant by September 2011.
Fifty restaurants are now testing the electronic devices.
It will cost $32 million to install the machines in the province's 18,000 restaurants, Revenue Minister Robert Dutil said Thursday.
That's $1,778 per restaurant. This surely is a response to the "Zapper" skimming software that electronically hides cash receipts from the tax authorities. Likely results include leaving the register door open for cash transactions, long delays in getting broken registers fixed, and ingenious criminals hacking the new machines.
Things like this should give pause to those who think that a national sales tax would solve the problem of tax evasion.
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The Tax Update is on the road in Ottumwa today at Indian Hills Community College as part of the ISU Center for Agricultural Taxation Farm Tax School series, speaking to these happy practitioners. You can still sign up for schools in Muscatine, Denison, Mason City and Ames. Sign up today!
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When a C corporation is up for sale, the tax law pits the interests of the buyer against the seller. The buyer wants to buy assets to get a fresh new basis for depreciation, maximizing future deductions. The seller doesn't like that so much because much of the income from asset sales is often ordinary, and because the seller pays tax both on the asset sale and on the subsequent distribution of the proceeds from the corporation.
During the tax shelter frenzy of the late 90's, big-firm tax scientists tried to square the circle on stock sales with the "Midco" shelter. It was a simple structure as these things go. A tax-indifferent entity -- maybe an offshore shell company -- would buy the target company stock, and then turn around and sell the assets to the real buyer. If it works, the seller gets the benefits of a stock sale and the buyer gets the benefits of an asset sale.
A District Court last year said it doesn't work. Now the Fifth Circuit agrees with the Tax Court, reports the TaxProf.
Accounting firm PriceWaterhouse Coopers (PWC) arranged for a tax-indifferent "Midco" named "K-Pipe" to buy the stock of Bishop Group Ltd. and sell the assets to Midcoast Energy Resources. The appeals court said the IRS could ignore K-Pipe:
Accordingly, the uncontroverted facts support the district court's determination that the IRS was entitled to disregard the form of the transaction and treat it as a direct sale of stock. Given that the transaction was designed solely for the purpose of avoiding taxes, and Midcoast has offered no adequate non-tax reasons for using a conduit entity, the district court did not err in finding the IRS appropriately disregarded the form of the transaction.
So far there doesn't seem to be a single mass-marketed big firm shelter that actually worked reliably when challenged.
Cite: Enbridge Energy Co. v. United States, No. 08-20261 (5th Cir. Nov. 10, 2009).
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The Missouri Tax Guy has seven facts on non-business energy credits from the IRS
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...so it's an issue in the Iowa's gubernatorial campaign, reports David Brunori.
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Here is a tax reform plan for Iowa that I have passed around to a few friends. I may as well share it with you, too. Comments are invited. - Joe
The meltdown of the Film Tax Credit program illustrates the inherent problems of economic development tax credits. Iowa's subpar economic performance over the years in spite of its array of tax credits illustrates their futility.
It's time for Iowa to take a new approach to become attractive to all businesses, not just those with good lobbyists. Not only will it eliminate the opportunities for corruption built into tax-credit programs, but it will save Iowans millions of dollars and hours in tax planning and prep fees.
The Pieces:
1. Eliminate the Corporation income tax. The Iowa corporation income tax has the highest stated rate in the country, and one of the highest effective rates. The only reason it doesn't destroy Iowa's economy altogether is that it is so riddled with loopholes that collections are very low - well under 5% of the state budget. Yet it is a very expensive tax to administer and to comply with. Eliminating the tax would send a powerful message to companies looking for a place to invest for the long term.
2. Reduce the Iowa individual income tax to 4% or less. 3.99% would be much more attractive to entrepreneurs and executives considering Iowa locations. It would bring our rate decisively below all of the border states except for Illinois and South Dakota. Only a low rate will enable Iowans to give up the large number of special breaks that make compliance and tax administration expensive.
3. Strip down the Iowa tax law. To get the rate down to this level, Iowa will need to strip its tax law of a host of politically-motivated tax breaks. These include, among others,
- All economic development tax credits - ethanol, films, R&D, "targeted" jobs and the like, they all should go. Low rates are more important than any of these, all of which serve primarily to fund the well-connected.
- The deduction for Federal income taxes. If the rates are low enough, the deduction doesn't matter nearly as much. If its built into the rates, you protect poorly advised taxpayers who have a big once-in-a-lifetime income item - say, from selling a business - and losing the value of the deduction by paying the tax when it is due, rather than prepaying in the year of sale.
- The exclusion for ten-year capital gains.
- The credits for tuition funds, community foundations, and the like.
- The special pension and tuition breaks for old folks. Any breaks for poor folks should be in the form of a generous low-income exemption. Old folks with low income aren't necessarily more worthy than younger folks. In fact they often are much more wealthy than their younger counterparts.
Just because a break isn't mentioned here doesn't mean I want to keep it.
4. Make federal taxable income the starting point for Iowa taxable income. If you use federal AGI as the starting point, you can achieve even greater simplification and lower the rates further. (Unmodified AGI as a tax base can create grossly unfair results, but it if you allow a deduction for gambling losses and Schedule A investment interest, you get a decent base). Federal changes in income computation would automatically be incorporated in Iowa's tax code, absent a vote of the legislature otherwise. It also makes Iowa's tax forms potentially postcard-sized.
5. Make Iowa's tax forms into a reconciliation format, starting with Federal taxable income. Have lines to back out federal Treasury income, which the state can't tax. If Iowa chooses to tax muni bond income, have a line for that. Have one last line for all (any) other addbacks and subtractions, which would feed from separate detail schedules.
6. The most difficult issue is taxation of S corporations. I would allow S corporations to elect to be Iowa C corporations and make Iowans taxable on distributions from the corporation as if they were C corporations. Electing corporations would have to report distributions to Iowa shareholders to the state, and the shareholders would be taxed as if the distributions were taxable dividends; otherwise electing corporations would pay no tax on Iowa-source income. Iowans owning Non-electing S corporations would be taxed in Iowa on all their S corporation income. This would achieve near-parity between Iowa C and S corporations.
These proposals do not have revenue projections. The idea is to not reduce Iowa's tax receipts. This is an attempt to provide a target, an ideal for improving the system. I would love to see what the revenue projections would be. Unfortunately, unlike IRS, Iowa doesn't release any statistical information that would enable us to make those kinds of estimates.
Whatever the projections would be, I have no doubt that "no corporate taxes and low individual rates" would be better for Iowa's economy than "high taxes with lots of loopholes for those with connections and lobbyists."« Close It
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The Obama tax reform commission looks like it will be even more futile than is typical for these things, reports TaxVox:
Despite once-high expectations, it is likely to be a waste of everyone's time.
Those "high expectations" were by no means universal.
The Board (the PERAB in Washington-speak) is hardly a bunch of economic lightweights. Chaired by ex-Federal Reserve Chairman Paul Volcker, its members include economist Marty Feldstein, GE CEO Jeff Immelt, venture capitalist John Doerr, former CEA chair Laura Tyson, and other stars of Wall Street, Main Street, academia, and labor. Its chief economist is Austan Goolsbee, a top-notch researcher who has had close ties to President Obama for years.
Yet the reform panel—technically a PERAB subcommittee-- is going to produce…a mouse. From its earliest days, the group was forced to work under impossible constraints. Chief among them: Obama's insistence that no one earning less than $250,000 should pay higher taxes. Exempting more than 95 percent of families and individuals from tax hikes of any kind essentially shut the door on any serious discussion of reform, which inevitably creates winners and, yes, losers.
So what are they doing?
A few months ago, we were told it would produce a document that looks something like CBO's revenue options—listing a narrow range of ideas without actually endorsing any of them.
Now, we learn, the panel may not even do that. Rather, it will merely enumerate possible ways to simplify, improve enforcement, or restructure the corporate tax without even hinting which the Administration favors and which it does not. Other than serving the need to produce something, I can't imagine why they are even bothering.
I have a theory. These panelists are real economists, and they have advice the President doesn't care to hear. They were fine window dressing during the campaign, but they're no longer useful. Mr. Volker has been famously ignored since the election. Mr. Goolsbee, as a real economist, argued in the White House that the government takeover of GM was unwise. The otherwise useless tax reform panel is a handy cone of silence for troublesome voices.
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Today is Veteran's Day.
Merle Hay, the first Iowan to die in World War I
Kay Bell marks the day with tax tips for those in the service.
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TaxGrrrl asks a good question:
Notwithstanding public options and other controversial parts of the health care reform bill, the real issue that remains of concern to many is how the plan is going to be paid for… In addition to the 40% tax on those Cadillac plans proposed by the Senate, the bill as recently passed by the House would impose a 5.4% income tax on individuals making more than $500,000 and joint filers making more than $1 million. If existing tax cuts expire in 2011, which appears increasingly likely, the top income tax rate would grow to 45% – a 10% increase.
But here's a thought. In an increasingly dim economy, isn't it a little scary to rely on higher taxes from top wage earners to foot the bill?
It's all part of the illusion that it will be free.
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A new tax blog roundup from Robert D. Flach is up!
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It's more fun to be Santa than Bob Cratchit. Politicians have more fun, and more press, when they give away money in public than when they have to say "no" in private. That's why it's so easy for tax credit programs, like Iowa's film credit program, to go off the rails.
A trove of email messages to and from the Governor's office about the film credit program obtained by the Associated Press shows how this works.
Another e-mail in 2007 from Economic Development official Shawn Rolland sought the governor's availability to talk with Terry Trimpe, a movie producer who was considering a production in McGregor.
"Gov will have time to talk with Terry," Culver aide Brad Anderson replied. Lauren Burt, the governor's event coordinator, notified Rolland that she would be sure Culver had background on Trimpe's plans.
It's fun to meet with glamorous Hollywood types, but, as they inadvertently note, less fun to keep an eye on the money:
Despite the numerous e-mails, Culver spokesman Troy Price said the communications didn't deal with film office details.
"The vast majority of them did not deal with the operation of the film office, until this was brought to our attention," Price said. "After that, obviously we paid close attention."
Of course they didn't deal with the grubby details of the film office. That's all boring numbers stuff.
In the private sector, people learn to pay attention before they spend millions of dollars or get entangled in breach-of-contract lawsuits. But what fun is that?
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A Humboldt preparer with a niche in the trucking industry was hit with a permenent injunction yesterday, but one that should enable her to continue doing tax work. From a Department of Justice press release:
A federal judge in Sioux City, Iowa, today barred a Humboldt, Iowa, woman, Gayle Lemmon, and her tax preparation business from claiming improper deductions on federal income tax returns. The court's order, which Lemmon agreed to, also prohibits her from representing customers before the IRS and requires her to attend government-approved tax training classes.
The wording is strange. Most preparer injuctions permanently put the preparer out of business. This one just says "sin no more, and get some CPE." The preparer didn't fight the case. Maybe her cooperation led to leniency, or her sins were minor, or the government's case wasn't that overwhelming.
Link: Copy of injunction order (Update: link fixed)
Update, 12/4/09, from the comments:
Hello, I was the attorney who represented Gayle Lemmon in this lawsuit. In fact Gayle Lemmon did "fight" the case and was successful in her defense. You are right that the government essentially said, "Go and sin no more," and this was a vindication of Gayle and the fact that she prepared and continues to prepare proper tax returns. Thank you. John Ellsworth, Esq.
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The tendency to use the tax code as the Swiss Army Knife of public policy reaches absurdity in the "health care" bill passed over the weekend in the House. It's so bad that even former IRS big shots are speaking out, Tax Analysts reports ($link):
The commissioners said they were not surprised that Congress would turn to the IRS to administer the program, the size of the task notwithstanding.
"For a Congress that loves to trash and bash the IRS, every time they need somebody to do something, that's the agency they turn to," [former IRS Commissioner Margaret] Richardson said.
While some former big shots say the IRS could handle it, given time and money (not likely), one pointed out the obvious:
However, Larry Langdon, former commissioner of the IRS's Large and Midsize Business Division, pointed to drawbacks in using the IRS to administer healthcare tax programs. "These kinds of programs require social welfare expertise," Langdon said. "IRS agents are not recruited or trained to do that well."
"The IRS record is mixed and sometimes abysmal with regard to effectively administering these kinds of programs," he added.
Langdon said a Treasury Inspector General for Tax Administration audit released earlier this year estimated the earned income tax credit to have a fraud rate of approximately 25 percent, with the IRS annually handing out erroneous payments totaling between $10 billion and $12 billion.
And just wait for the phones to start ringing:
The IRS is already overwhelmed with call volume, according to National Taxpayer Advocate Nina Olson. "I personally think that the IRS is teetering on the brink of really difficult times in not being able to manage the workload in terms of the phone calls and the paper that we are getting," Olson said October 27 at the American Institute of Certified Public Accountants' National Tax Conference in Washington.
It's hard enough for the IRS to just correctly determine and collect the tax. Pelosicare is one more step in the transfromation of the IRS from a tax collector to a super-agency that shoves aside the cabinet officers nominally in charge of public policy.
Flickr photo of "The ultimate Swiss Army Knife" by redjar
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Kay Bell says it might justs happen to the above-the-line deduction for sales taxes on new cars. Well, it hasn't exactly saved the auto industry.
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Commuters fight their way to work at 8:30 this morning on the main street in Griswold, Iowa, where I am participating today in the Iowa Center for Agricultural Law and Taxation Farm Tax School. There's still time to sign up for the remaining five locations!
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November 9, 1989:
It's still hard to believe that hideous thing is really gone. It seemed like it would be there forever. Good riddance.
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Tax lawyer Ron W. Wood lists "Ten Ways To Audit Proof Your Tax Return" at Forbes.com. Most of the advice is sensible ("Don't claim flaky deductions").
One piece of advice, though, doesn't compute to me: "Don't file electronically."
The cost (in time or fees paid to professionals or software providers) may be lower. You save paper, and you don't deal with the post office.
Yet you are giving the IRS easy electronic access to information it would otherwise have to enter, enabling the agency to examine your return and mine the data more easily than it otherwise could.
Seeing that returns done by preparers will have to be e-filed after 2010, this is pretty much academic. I don't think e-filing matters much though, and his next piece of advice actually helps contradict his e-filing point:
Check your math.
... If you do make a math mistake, you are likely to get a math correction notice from the IRS. This isn't an audit. But your goal is to minimize such interaction with the IRS bureaucracy, which isn't known for the best mail handling practices.
Every time you send a manual return, you interact with IRS employees who can trigger further investigation. That worries me at least as much as IRS data-mining software.
If you really want to avoid an audit, you can do so by having all of your income on 1099s and W-2s and accurately reporting them. That means you can't run or own a business -- not a great tradeoff for the entrepreneur. Rather than worrying about being audited, it's far better to keep good records, hire a good tax pro, and do the returns correctly. Then you don't have to lose sleep over being audited.
Via the TaxProf.
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There's a heating contractor in Milwaukee who will never get out of a financial hole, if these allegations are true:
A federal court in Milwaukee, Wis., today issued a preliminary injunction ordering a Milwaukee heating contractor and its owner and president to comply with federal employment tax payment requirements. The preliminary injunction order, signed by U.S. District Judge J.P. Stadtmueller, was entered against Dykeman Family Corp. and its owner, Michael K. Dykeman. The order bars the company from disbursing any funds after wages are paid to employees until the taxes withheld from those wages have been paid to the Internal Revenue Service. Violations of an injunction can lead to civil and criminal sanctions, including fines and imprisonment.
The Justice Department filed the suit in September, seeking to enjoin defendants from continuing to run up unpaid payroll tax liabilities. The complaint alleges that defendants have failed to comply with their tax obligations since 2002. According to the complaint, the business failed to pay over $870,000 in federal employment and unemployment taxes between 2002 and 2007.
I suspect that they haven't exactly been putting unpaid payroll taxes into nice safe bank CDs in the meantime. The IRS isn't likely to collect much, while the owners are likely to not see financial daylight for a long, long time.
Withholding taxes are critical to the functioning of the income tax. If the IRS hasn't been able to stop non-compliance over seven years, something is awry somewhere in the enforcement process.
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Now that the great Bucks for Bungalows promotion has been extended through next April, TaxVox asks why we should stop there. There are so many worthy causes crying out for a tax credit:
Santa Claus Tax Credit: Retailers predict desultory holiday sales this year. The Santa Claus credit would pump up purchases by reducing the after-tax cost of gifts purchased and given by the end of 2009. The non-returnable credit would equal half the cost of any gift bought in person by people using handwritten letters to Santa from children under age 15 who live with relatives at least nine months during 2009 and still believe in Santa, the tooth fairy, and the Easter bunny. Alternative credits would benefit people who celebrate Hanukkah, Kwanza, or the winter solstice.
Except for the age part, I think Congress qualifies, considering what they have to believe to think Cash for Condos, or the Pelosi health plan, make sense.
More on the Homebuyer Credit:
Taxable Talk
Kay Bell
Roni Deutch
Stacie Clifford Kitts
Also, Roger McEowen has an excellent rundown of the newly-enacted tax provisions of the bill.
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A transformer blowout has closed the Financial Center, World Headquarters for Roth & Company and the Tax Update Blog. We apologize for the inconvenience.
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The bill to extend and expand the fraud-ridden $8,000 First-time Homebuyer tax credit passed the House of Representatives yesterday on a 403-12 vote. It now goes to the President, who is expected to sign quickly (Update: The President signed the bill today) .
H.R. 3548 expands the credit to single taxpayers with AGI up to $125,000 and joint filers with AGIs up to $225,000; it phases out over a $20,000 AGI range beyond those limits. It also enables non-virgin homebuyers to qualify for a $6,500 credit if they've been in a house for five consecutive years out of the last eight.
The $8,000 credit was slated to expire at the end of this month; it now runs through next April 30.
NOL Extension
The bill also allows all taxpayers to carry back net operating losses for 2008 or 2009 back five years -- with a weird provision that only lets you offset half your income for the fifth carryback year. This will be welcome news to many taxpayers. A similar provision passed last year only applied to 2008 losses, and only for businesses with gross receipts up to $15 million. Many money-losing businesses have higher gross receipts, and many businesses are having a worse 2009 than 2008.
The IRS will have to release rules for claiming the new expanded carryback; we hope they are issued soon, as we know a lot of money-losing businesses could use the refunds about now.
California Dreaming in Congress
Other coverage:
Farm CPA Today
Kay Bell
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When you face a hefty tax bill, the temptation to cheat on your taxes can be hard to resist -- apparently too hard for two Minnesota brothers. Joseph Edward Riley and John Thomas Riley pleaded guilty to one federal conspiracy charge yesterday in St. Paul.
They were indicted in April on charges of skimming receipts without including them in corporate income and paying personal expenses with corporate funds. It's tempting to do this because you sometimes you can get away with it for a long time. The indictment charges the brothers with doing this from 1996 to 2003 -- long enough, perhaps, to give them a false sense of security.
Remember: The standard IRS audit programs for closely-held businesses include procedures to spot payments of owner personal expenses. Taxpayers who use corporate funds to pay personal expenses stand a good chance of getting caught on audit.
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April15.com blog tells how careful recordkeeping allowed a billionaire to avoid millions of dollars in New York city and state taxes when he showed he only spent 179 days in the city. Four more days would have made him a "resident" for the year, enabling the city and state to tax him on all of his income, not just that from New York sources.
You'd almost have to be a billionaire to afford 179 days in Manhattan.
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Iowa Public Television ran a half-hour feature about Iowa's 30 or so "economic development" tax credits last night. These credits are getting more attention in the wake of the use of the film credit to buy luxury cars and Ipods for out-of-state film producers.
If you missed it last night, the Iowa Journal feature will be on again tonight at 6:30, and eventually on the IPTV web site. You can catch two clips from the show on the web now. This one is a generic discussion of what a tax credit is, while the other one is tells how Newton, Iowa attracted elements of the already heavily-subsidized wind turbine industry with still more subsidies.
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California just jacked up its withholding rates to force people to overpay their taxes, because the State decided it needs the money more than the subjects do. Most people find this sleazy and outrageous, which means Congress finds it inspirational. Hence this confection at the end of H.R. 3548, the bill that extends unemployment benefits and the Homebuyer Tax Credit pinata:
The percentage under paragraph (1) of section 202(b) of the Corporate Estimated Tax Shift Act of 2009 in effect on the date of the enactment of this Act is increased by 33.0 percentage points.
What it means in English is that calendar-year corporations with $1 billion or more of assets have to overpay third quarter 2014 estimated taxes by 33.25%. They will recover it with a lower fourth quarter payment in December 2014, but that's after the current five-year Senate budget window ends, so as far as Congressional accounting is concerned, it never happens.
It's Congressional bookkeeping-as-usual, but accountants for Enron and WorldCom are rotting in jail for less.
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So the $8,000 first-time homebuyer credit is riddled with fraud and costs taxpayers $43,000 to $80,000 for each home bought sooner as a result of the credit. The sensible legislative response would be to immediately repeal the credit, apologize abjectly, and have at least one Senator commit ritual Chuck Grassley atonement.
Of course, that's not what is happening. Instead the Senate yesterday voted 98-0 to extend the credit and make it apply to more people. WebCPA reports:
The refundable credit, which was included in the financial stimulus package in February, was set to expire at the end of November. But the real estate, mortgage and construction industries had pushed for an extension of the credit beyond the deadline. The new legislation extends the maximum $8,000 tax credit for first-time homeowners to April 30, 2010. It also includes a maximum $6,500 tax credit for existing homeowners who want to purchase a new abode. However, they need to have lived in their current home for five consecutive years within the past eight years.
The level of qualifying income has also been expanded, allowing individual taxpayers who make up to $125,000 and joint filers earning up to $225,000 to qualify. The earlier credit had been limited to individuals earning up to $75,000 and couples earning up to $150,000.
The credit phases out over a $20,000 income range, which creates a hidden tax bracket for single filers of 68% - the 28% regular tax plus the 40% additional tax caused by each dollar of income in the phase-out range.
Tax Analysts reports that the House may pass the bill, H.R. 3548, as early as today, and that the President is expected to sign (UPDATE, 11/6/09: The President signed the bill today).
Kay Bell has more.
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All taxpayers with net operating losses for 2008 and 2009 would be able to carry them back five years under a provision passed by the Senate yesterday. Tax Analysts reports ($link):
H.R. 3548 would also allow all companies (except those assisted by the Treasury Department's Troubled Asset Relief Program) to deduct losses from either 2008 or 2009 against income reported over the previous five years. Businesses would be able to offset 50 percent of available income from the fifth year, but 100 percent of available income for the remaining four years.
The five-year carryback that applied to 2008 losses only applied to businesses with gross receipts under $15 million, greatly limiting its usefulness.
Tax Analysts says the bill could pass the House as early as today; the President is expected to sign it.
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The top .3% of taxpayers earn 13.82% of adjusted gross income, but pay about 27.63% of federal individual income taxes. If the Pelosi 5.4% of AGI surtax kicks in, the top .3% will pay about 35.6% of taxes, according to the Tax Policy Blog.
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If Nancy Pelosi has her way, avid gamblers could go bankrupt even if they win. The House of Representatives health plan has a 5.4% surtax on adjusted gross income, rather than taxable income. Gambling winnings are "above the line" taxable income, but losses are "below the line" itemized deductions, which aren't part of AGI. Russ Fox explains how this works out:
Suppose you're an amateur gambler. Say you're a college student. You net $45,000 playing poker tournaments. When you determine your annual wins and losses you find that your gross winnings are $800,000 and your gross losses are $755,000. You take the losses as an itemized deduction, and you pay tax based on the $45,000 of income (less your exemption and any other itemized deductions).
Under the House Health Care Plan (aka PelosiCare), the hypothetical gambler would be hit with a 5.4% surtax on his $800,000 of Adjusted Gross Income, or $43,200. Ouch.
Unmodified AGI is an awful income base. Not only does it clobber gamblers, but it also can whack taxpayers with investment interest expense, which is also below the line. But stupidity and unfairness are little deterrent to legislators.
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This is a truly awful idea from a Michigan professor named Kyle Logue:
This Article highlights the primary tax enforcement problem in the United States, that of noncompliant small and medium-sized businesses ("SMBs"), and it explores the possibility of a radical solution: shifting away from the current system that attempts to tax the actual individualized income of each business and toward a system that taxes only a rough approximation (or probabilistic estimate) of business income.
Some states, Texas among them, do this already. If they don't see a tax return (or sometimes even if they do), they assess the taxpayer based on the scientific wild-assessed guess (SWAG) method, forcing the taxpayer to prove the invented numbers wrong. But at least the taxpayers get to counter the SWAG assessment with real numbers.
This sort of presumptive tax approach has been used for years in developing economies, where the problem of SMB noncompliance is even worse than in the U.S. This Article suggests that the time may have come for taxing SMBs in the U.S. on a presumptive basis as well.
Interesting thinking. Non-compliance is even worse in other places, so we should follow their example? Maybe non-compliance is worse because they know that no matter how much they report, the "probabilistic" estimate will always assess them even more. That's part of why they're still "developing" countries.
This regime would thus produce a sort of probabilistic taxation of SMB income. Whether such a regime would make sense depends on a number of key unanswered questions, including how narrowly and accurately such historical line-of-business profit percentages can be drawn and at what cost.
It would never make sense. Every business is unique. It's not uncommon for one competitor to be profitable and one to be losing money -- and then to change places in a year or two. To assess income taxes based on industry averages would be absurd. You might as well just abandon the income tax and assess based on gross receipts -- at least then there would be no pretense that you were assessing "income."
Via the TaxProf.
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A taxpayer failed to pay tax on a life insurance policy surrender. He tried the venerable "play dumb" defense when he got to Tax Court:
Despite being the owner and beneficiary of the policy and receiving numerous letters and statements informing him of the tax consequences of the policy in general and upon surrender, petitioner argues that he was unaware that the gain on the policy upon surrender was taxable to him. He claims he immediately forwarded all mail related to the policy, including Form 1099-R, to Ms. Barr [his mother] and that he has no recollection of ever seeing Form 1099-R.
But the Judge gave him more credit for smarts than he wanted to claim:
Petitioner is an experienced attorney admitted to practice before the Tax Court. Petitioner's testimony that he called Ms. Barr to discuss letters and statements he received in 2005 is contradictory to his testimony that he automatically forwarded all mail to Ms. Barr without opening it. He received a check for $11,648.33, which he did not forward to Ms. Barr but deposited into a bank account. Even if petitioner forwarded Form 1099-R to his mother without viewing it, he is not excused. Negligence does not require a bad intent or a willful act. Petitioner knew, or should have known, that because he was the owner and beneficiary of the policy, any proceeds paid out or gain recognized would be taxable to him. Petitioner's failure to report income shown on Form 1099-R was not on account of reasonable cause and good faith.
Bottom line: Tax and penalties.
The Moral: Tax lawyers don't get to play dumb about tax rules.
Cite: Barr, T.C. Memo. 2009-250
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...not the powerful and well-connected. Peter Pappas is on the beat:
Republican Ed Rollins Owes $1.3 Million in Federal and State Taxes
[Democratic] Oakland Mayor Ron Dellums Owes IRS $239,000
More evidence that "bipartisanship" is what happens when the Crips and Bloods happen on an untended armored car at the same time.
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How could this happen?
An IRS employee pleaded guilty on Tuesday in federal court to stealing mail from the IRS facility on Pershing Road, prosecutors said.
Latrice Antoinette Murray, 38, of Kansas City, Mo., pleaded guilty before U.S. District Judge Dean Whipple to charges contained in a Sept. 8, 2009, indictment.
Murray admitted that she rifled through misdirected and/or misdelivered mail, removing and stealing cash and gift cards from the mail. She admitted to the court that she stole mail on five different dates between Feb. 9 and April 9.
I'd feel a lot better about regulating me if they seemed more capable of regulating their own.
Related: Only trust official Treasury employees to steal your mail
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Today is the 120th anniversary of the patenting of the cash register (via @Vpostrel Twitter feed).
Flickr photo by PAVDW under Creative Commons license.
As a kid, the big old mechanical cash registers fascinated me, with their intricate, ingenious and often fragile assembly of hundreds of moving parts. Maybe that led me down the garden path to accountancy. I'd still love to have one, but I bet working ones aren't cheap.
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You knew this would happen once they shut the Iowa Film Credit money faucet:
A group of international filmmakers has sued Iowa's Department of Economic Development after having to postpone a multimillion-dollar project due to problems with Iowa's tax-credit program for filmmaking.
The lawsuit, the first since Gov. Chet Culver suspended the program in September, alleges breach of contract after the state failed to issue a final contract needed to obtain financing to complete the film.
The lawsuit also seeks an injunction allowing the project to move forward.
We'll soon learn just what committments the state made to the filmmakers, and whether taxpayers will be on the hook for $363 million, the $32 million already spent, or something in between.
We'll no doubt hear lots of sad stories about films not being made because of the sins of a few bad apples. When you hear this, keep in mind that there isn't complete documentation for a single film out of the 18 or so already awarded credits, and only two films bothered to even submit receipts. The filmmakers haven't exactly earned the benefit of the doubt.
Sure, it's hard for the producers to have to wait on their Ipods, Benzes, and large payments to family members. We all have our crosses to bear.
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A headline written by a "half-full" kind of editor:
Iowa revenue down, but not by double-digits
Great news! It could have been even worse!
The Legislative Service Agency's monthly revenue report Monday indicated that state net tax receipts are running $151.4 million behind the same four-month period last fiscal year. That represents are drop of 7.8 percent so far this fiscal year compared to the July-through-October period of fiscal 2009.
"It's great not to see double digits, even if it is for one small month," said Jeff Robinson, a fiscal analyst at the nonpartisan legislative agency. October's 2.7 percent decline, while "not terrible," still represented 11 months of slumping revenues, he added.
"Not Terrible!" All right, then.
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A cri de couer from Monica Lawver, The Tax CPA.
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Quick, before winter sets in, hop on your horse and gallop to Kay Bell's Carnival of Taxes!
Good stuff on everything from year-end planning to S corporation basis issues at this roundup of the latest tax blog posts.
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Usually the scary books come out ahead of the Halloween horror season, but Paul Caron defies convention by announcing the new edition of Tax Stories today.
It's really a series of short stories about some of the biggest tax cases. I have the first edition, and it's a good read wherever you start. The Glenshaw Glass chapter was hugely helpful in understanding the twists and turns of the Murphy case.
I need to buy my wife a birthday present. I can't wait to see the excitement when she unwraps the new edition of Tax Stories!
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While the Senate health care bill pretends to pay for itself through increased taxes on insurance policies, the House bill pretends to finance itself through taxes on "the rich." The Tax Policy Blog explains*:
The $1.05 trillion House health care reform legislation unveiled by Speaker Nancy Pelosi yesterday is financed primarily through net cuts to Medicare (which would save $472.8 billion, or 39 percent of the bill's 10-year cost), and a 5.4 percent surtax on high-income individuals (which would generate $460.5 billion, or 38 percent of the bill's cost), according to a Tax Foundation review of the Congressional Budget Office's (CBO) analysis.
By comparison, nearly half of the $829 billion Senate Finance Committee plan is financed through Medicare cuts ($377.8 billion, or 41 percent of the bill's 10-year cost), and 22 percent would come from an excise tax on so-called "Cadillac" health insurance plans, which would raise an estimated $201.4 billion over 10 years. The House plan would reduce the deficit by $104 billion and the Senate version by $81 billion.
TaxVox questions the wisdom of the House plan:
First, do we really want to put most of the cost of a national priority such as health care on the backs of a relatively few people? My concern has more to do with our social compact than economics, but wouldn't it make more sense if we all had a horse in this race? I know, those hit by the surtax are the same people who benefitted most from the Bush tax cuts in 2001 and 2003. But there is still something wrong with pretending that health reform is a free lunch for 99.7 percent of us.
Gee, really?
The Tax Foundation has some great illustrations of the purported financing for the health bills:
The dark blue slices of the pie -- the largest ones -- are medicare cuts. These are cuts that will never happen.
But Tax Pro Russ Fox finds a silver lining:
This measure would lead to higher taxes on the wealthy. This would lead to more strategies by the wealthy to shelter income, which means more work for tax professionals. Additionally, the requirement that 1099s be issued to corporations would mean a lot more work for tax professionals. As I keep telling my brother, I'm convinced I have lifetime employment.
The problem is how long that "lifetime" might be after the IRS takes over health care administration.
* My apolgies for inadvertently omitting the link when the post first went up, and for not correctly block-quoting the entire passage from the Tax Policy Blog. Fixed now, I think.
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The author of "Cracking the Code: The Fascinating Truth About Taxation In America," is finding out there's more to the tax law than he imagined:
Peter Hendrickson, 54, of Commerce Township was found guilty today of making false statements to the IRS by a federal jury in Detroit, United States Attorney Terrence Berg announced today.
The jury deliberated for about four hours before returning the verdict, concluding a five-day trial before Chief United States District Judge Gerald Rosen .
The 10-count indictment charged that for the calendar years 2000, 2002,2003, 2004, 2005 and 2006 Hendrickson filed IRS Form 1040 (income tax returns) and/or IRS Form 4852 (Substitute for Form W-2) stating under penalties of perjury that he had received no wages in those years. The indictment indicated that he had in fact received wages in those years in varying amounts. The evidence produced at trial established that Hendrickson had in fact received taxable wages and that his claims to the contrary were knowingly false. In reaching the verdicts, the jury rejected Hendrickson's defense that he had a good faith belief that his statements regarding his lack of wages were true.
Flickr image by House of Sims through Creative Commons license
The tax code is an awful mess, and Congress never passes up a chance to make it worse. That doesn't mean there is a secret formula from the Illuminati that you can invoke to make it part for you like the Red Sea did for Moses. Just ask the man who wrote the book.
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The man who vouched for the fairness of Bernard Madoff's financial statements is expected to plead guilty to securities and tax charges tomorrow:
In a letter filed in federal court in Manhattan, Assistant U.S. Attorneys Lisa Baroni and Marc Litt said that it is expected that David G. Friehling, 49, of upstate New City, will plead guilty Nov. 3 to charges of securities fraud, investment adviser fraud, making false statements to the Securities and Exchange Commission, and obstructing tax collection laws.
Apparently there was something wrong with the Madoff statements.
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The GAO says the IRS doesn't do a very good job of issuing collection notices and following up on them:
We found that collection officials lacked information to know what the notice-phase business rules are and how the rules operate. In some cases, the officials either did not know or misunderstood these key business rules. For example, in a meeting with us, IRS executives and managers cited three different amounts for the dollar threshold of the low dollar rule, which determines which notices are sent and whether further collection action will be deferred or the debt will potentially be offset by levying a state refund.
It's hard enough for the IRS to do the one task it should be doing: collecting taxes. It's crazy to also assign it tasks like assuring energy efficiency, monitoring research and development, and, heaven forbid, managing the nation's health care.
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Professor Maule unmasks the idea of deducting your Halloween costume.
(Via the TaxProf).
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It's a two-newspaper day.
I'm featured in a Des Moines Business Record piece speaking truth to tax credits. I'm also quoted in a Des Moines Register story on demutualization, where I discuss my tax return position in the unfortunately hypothetical event that I made a pile from Principal's IPO.
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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 necessarily shared by anyone else at Roth & Company, P.C. Address questions or comments on Tax Updates to


text: i need to create a user control using mono touch. is it possible ? i see a mono touch library project type in mono develop, if i use that to create a library, how to specify it to be a user control ? and how to use it in main application ?

subset: commoncrawl