As a weapon in their fight against tax shelters, the IRS has created something called "Transactions of Interest". In short they aren't saying these are illegal or bad, merely that the IRS will scrutinize such transactions.
Additionally if the taxpayer doesn't disclose their involvement in a Transaction of Interest, then they could be subject to some hefty fines.
During a recent tax luncheon, an IRS attorney was asked how long something could be considered a transaction of interest, the IRS attorney replied, "For a transaction of interest, we know there's something interesting going on here, but we may not have all the information."
I don't know about you, but that sounds awfully vague. Speaking of vague, someone then asked about if the IRS was ever going to issue some regulations on what exactly they meant by "substantially similar".
By way of background, when the IRS puts the world on notice that the IRS will consider a transaction s a tax shelter transaction, they always state that the described transaction and anything "substantially similar".
Thus the question about any guidance on what exactly is "substantially similar". I think you already know the answer to the question.
No further guidance will be coming from the IRS.
How exactly are people supposed to follow the rules when they are full of vague, amorphous concepts such as substantially similar and transactions of interest?
Friday, September 7, 2007
Spoken like a true politician
The tax planning community is up in arms about the ability to patent a tax idea.
Now, if someone decides to do some innovative planning, they have to be concerned they they are infringing upon someone else's patent.
Its really mind boggling that someone can get a patent for interpreting and applying the code, but the patent office is currently allowing it.
Well, the White House, via the Office of Management and the Budget decided to finally do something about it. On 9/6 they issued the following profound statement,
"The administration understands the concerns surrounding patent protection for tax planning methods and will work with Congress to address those concerns,"
Huh?
What exactly did they say? Whoever thought up that statement needs to be promoted to chief speechwriter.
Now, if someone decides to do some innovative planning, they have to be concerned they they are infringing upon someone else's patent.
Its really mind boggling that someone can get a patent for interpreting and applying the code, but the patent office is currently allowing it.
Well, the White House, via the Office of Management and the Budget decided to finally do something about it. On 9/6 they issued the following profound statement,
"The administration understands the concerns surrounding patent protection for tax planning methods and will work with Congress to address those concerns,"
Huh?
What exactly did they say? Whoever thought up that statement needs to be promoted to chief speechwriter.
Tuesday, September 4, 2007
Embezzled Payroll Taxes
Nobody ever said the tax system is fair, and this case proves it.
In Paris v. IRS, the taxpayer hired his brother as his accountant. Bad brother proceeded to embezzle the money that amongst other things was used to pay the payroll taxes of the business.
Good brother ultimately finds out, but seeing as this is a bankruptcy case, it doesn't look like there is a good ending.
Not only that, but now the IRS is going after good brother for the payroll taxes, and trust fund recovery penalties (100% penalties, ouch!).
BK judge determined that good brother knew payroll taxes were due to the IRS, and yet good brother paid other creditors before the IRS. Because good brother knew taxes were due, and didn't pay them, BK didn't wipe out the debt to good brother.
Morale to this story? Never do payroll for yourself. Hire someone, trustworthy, to take care of it for you. The downside risk is just too great.
In Paris v. IRS, the taxpayer hired his brother as his accountant. Bad brother proceeded to embezzle the money that amongst other things was used to pay the payroll taxes of the business.
Good brother ultimately finds out, but seeing as this is a bankruptcy case, it doesn't look like there is a good ending.
Not only that, but now the IRS is going after good brother for the payroll taxes, and trust fund recovery penalties (100% penalties, ouch!).
BK judge determined that good brother knew payroll taxes were due to the IRS, and yet good brother paid other creditors before the IRS. Because good brother knew taxes were due, and didn't pay them, BK didn't wipe out the debt to good brother.
Morale to this story? Never do payroll for yourself. Hire someone, trustworthy, to take care of it for you. The downside risk is just too great.
IRS Employee denied Deductions
We all know the old adage, "Those who can't teach." In this case, it should be "Those who can't audit."
In DARRYL F. ROYSTER, v. IRS, the taxpayer, an IRS employee (he wasn’t actually an auditor, instead he was a computer equipment analyst/information technology specialist) seemingly had a heart of gold and wanted to start a basketball school/ motivational business for kids in urban Chicago.
The challenge is that he took a number of business deductions for the ”business”, a “business” that ran losses of $20K, give or take a few thousand, for every year over a 3 year period. Evidently he didn’t charge his students fees to attend his school.
Can’t say this enough. If you want to have a business respected by the IRS, you have to treat it as such yourself.
Would a non related investor be happy with, and invest in a business that generated losses of 20K a year? A business that didn’t charge its clients a fee for its services?
Probably not. Thus the business deductions were disallowed.
In DARRYL F. ROYSTER, v. IRS, the taxpayer, an IRS employee (he wasn’t actually an auditor, instead he was a computer equipment analyst/information technology specialist) seemingly had a heart of gold and wanted to start a basketball school/ motivational business for kids in urban Chicago.
The challenge is that he took a number of business deductions for the ”business”, a “business” that ran losses of $20K, give or take a few thousand, for every year over a 3 year period. Evidently he didn’t charge his students fees to attend his school.
Can’t say this enough. If you want to have a business respected by the IRS, you have to treat it as such yourself.
Would a non related investor be happy with, and invest in a business that generated losses of 20K a year? A business that didn’t charge its clients a fee for its services?
Probably not. Thus the business deductions were disallowed.
Recent Trader Advice
A recent case came down showing how not to obtain traders status. Stanley C. Cameron v. Commissioner emphasized what most tax advisers know about active trader status, you must treat your “trading” as a business.
In this case, the taxpayer received an insurance settlement of $71,000 and decided to quit their day job to make it as a trader. The challenge is that they weren’t active enough in their trading to convince the IRS that they truly were a business.
In 2002, Mr. Cameron had 46 purchases and 12 sales of securities. Hardly the 300 trades that the IRS has mentioned in previous advice. In 2003, he completed 109 purchases and 103 sales, never traded more than 5 days a week, and in fact only traded 10 days in a month twice.
Because of the lack of activity, the court denied his status as a “trader in securities” and thus disallowed his business expenses.
Bottom line: Previous cases tell you all you need to know. You need substantial trading activity, (Probably more than 300 trades a year), the trading needs to be continuous, not just 2 days out of the week, and it needs to be the pursuit of profit from short term trades.
In this case, the taxpayer received an insurance settlement of $71,000 and decided to quit their day job to make it as a trader. The challenge is that they weren’t active enough in their trading to convince the IRS that they truly were a business.
In 2002, Mr. Cameron had 46 purchases and 12 sales of securities. Hardly the 300 trades that the IRS has mentioned in previous advice. In 2003, he completed 109 purchases and 103 sales, never traded more than 5 days a week, and in fact only traded 10 days in a month twice.
Because of the lack of activity, the court denied his status as a “trader in securities” and thus disallowed his business expenses.
Bottom line: Previous cases tell you all you need to know. You need substantial trading activity, (Probably more than 300 trades a year), the trading needs to be continuous, not just 2 days out of the week, and it needs to be the pursuit of profit from short term trades.
Wednesday, August 29, 2007
Even the IRS doesn't understand the Tax Code
The Inspector General for the IRS recently released a report on help that the IRS provides to taxpayers. In particular, the IG sent in undercover auditors to check out the info that IRS staff was providing. Unfortunately most of us already knew what the results were going to be without reading the report.
Unknown to most people, the IRS will actually help you file your "simple" tax return, in theory for free. In the recent audit, the IG tried two different methods of free filing: using humans at the IRS service centers, and the free filing software provided by IRS "partners".
The results were hilarious. Using humans at the IRS service centers generated 75% correct returns.
Of the 25% incorrect, the results were all over the place, from an overpayment of $1,808, to an underpayment of $5,000.
Then the "auditors" tried creating returns with the free software provided by the various tax software companies. In this case only 57 percent of the returns were correct, with once again the results being an underpayment of a little over $1,000 to overpayments of over $5,000.
Something to keep in mind about these results. These were relatively simple returns, just think how much of a mess would have resulted if the sample returns were more complicated.
The bottom line is the tax code is way too complicated. When even agents of the IRS can not file a proper tax return it is time for Congress to take action.
Unknown to most people, the IRS will actually help you file your "simple" tax return, in theory for free. In the recent audit, the IG tried two different methods of free filing: using humans at the IRS service centers, and the free filing software provided by IRS "partners".
The results were hilarious. Using humans at the IRS service centers generated 75% correct returns.
Of the 25% incorrect, the results were all over the place, from an overpayment of $1,808, to an underpayment of $5,000.
Then the "auditors" tried creating returns with the free software provided by the various tax software companies. In this case only 57 percent of the returns were correct, with once again the results being an underpayment of a little over $1,000 to overpayments of over $5,000.
Something to keep in mind about these results. These were relatively simple returns, just think how much of a mess would have resulted if the sample returns were more complicated.
The bottom line is the tax code is way too complicated. When even agents of the IRS can not file a proper tax return it is time for Congress to take action.
Tuesday, August 14, 2007
Nevada Corps and privacy?
If I just had a dime for each time someone told me how much privacy their Nevada corporation was going to give them, and how they wouldn't have to pay taxes on their corporate income. . .
This might have been true a few years back, but we are now in the information age, the age of the internet. Once an ounce of information has been shared, its available everywhere.
Case in point, corporation tax returns. The sales line used by the Nevada corporation sellers is that since Nevada doesn't have a corporate tax, there is no information shared with the IRS, and ultimately the state where the Nevada corporation owner lives.
What the promoters don't tell you is that every corporation is required to file a tax return with the IRS. Also, the IRS has a program to share information with the various states. So when you file the corporate return for your Nevada corporation with the IRS, the IRS can in turn share that information with your home state.
Think the IRS and your home state are too stupid and lazy to actually do this? Think again. In a recent report created by the IRS for the Joint Committee on Taxation, the IRS reveals that they shared data with various states over 2 billion times, 2,809,446,617 to be exact, in 2006.
What does that mean to you? That means that if you are using a Nevada entity, even though Nevada may not share data with the IRS, the IRS is going to be sharing data with your home state. If you aren't properly reporting the income earned by your Nevada corporation to your home state, chances are you are going to be hearing from your state about the taxes you owe.
2,809,446,617, think about it. The population of the US is roughly 300 million. That means the IRS shared about 10 pieces of information with states for every man, woman, and child who lives here.
There is no privacy anymore.
This might have been true a few years back, but we are now in the information age, the age of the internet. Once an ounce of information has been shared, its available everywhere.
Case in point, corporation tax returns. The sales line used by the Nevada corporation sellers is that since Nevada doesn't have a corporate tax, there is no information shared with the IRS, and ultimately the state where the Nevada corporation owner lives.
What the promoters don't tell you is that every corporation is required to file a tax return with the IRS. Also, the IRS has a program to share information with the various states. So when you file the corporate return for your Nevada corporation with the IRS, the IRS can in turn share that information with your home state.
Think the IRS and your home state are too stupid and lazy to actually do this? Think again. In a recent report created by the IRS for the Joint Committee on Taxation, the IRS reveals that they shared data with various states over 2 billion times, 2,809,446,617 to be exact, in 2006.
What does that mean to you? That means that if you are using a Nevada entity, even though Nevada may not share data with the IRS, the IRS is going to be sharing data with your home state. If you aren't properly reporting the income earned by your Nevada corporation to your home state, chances are you are going to be hearing from your state about the taxes you owe.
2,809,446,617, think about it. The population of the US is roughly 300 million. That means the IRS shared about 10 pieces of information with states for every man, woman, and child who lives here.
There is no privacy anymore.
Monday, August 13, 2007
MLM'ers denied deductions
One of the big challenges facing multi level marketers is getting the respect they deserve. Not only from friends and family, but from the tax court as well.
In years past, the tax court has disallowed deductions claimed by MLM'ers under the theory that they weren't actually engaged in business, and that their activities had a large amount of personal "benefit". Kind of makes you wonder if your job is supposed to always be a dreadful day at the salt mines.
In the case of ROBERT D. AND CAROL A. BERRYMAN,.COMMISSIONER, the Tax Court had a fairly easy decision to make.
The Berryman's claimed losses of $ 49,590, $ 45,114, and $ 67,738 for 2002, 2003, and 2004 tax years. Deductions included cat litter????? Tickets to Oklahoma State games, and Dish TV.
Seriously guys, you can only take deductions for business activities, sure you might be able to write off that hotel room that your family used on your business trip, but cat litter? This brings up the age old phrase about hogs getting slaughtered.
Great point brought up by the court. If you were running losses of $50K+ a year, would a reasonable person continue to run that "business"? Simple answer, no.
Once again, MLMs can be a great opportunity to increase your income and receive some tax advantages at the same time, but you have to treat it like a business.
In years past, the tax court has disallowed deductions claimed by MLM'ers under the theory that they weren't actually engaged in business, and that their activities had a large amount of personal "benefit". Kind of makes you wonder if your job is supposed to always be a dreadful day at the salt mines.
In the case of ROBERT D. AND CAROL A. BERRYMAN,.COMMISSIONER, the Tax Court had a fairly easy decision to make.
The Berryman's claimed losses of $ 49,590, $ 45,114, and $ 67,738 for 2002, 2003, and 2004 tax years. Deductions included cat litter????? Tickets to Oklahoma State games, and Dish TV.
Seriously guys, you can only take deductions for business activities, sure you might be able to write off that hotel room that your family used on your business trip, but cat litter? This brings up the age old phrase about hogs getting slaughtered.
Great point brought up by the court. If you were running losses of $50K+ a year, would a reasonable person continue to run that "business"? Simple answer, no.
Once again, MLMs can be a great opportunity to increase your income and receive some tax advantages at the same time, but you have to treat it like a business.
This officer was no gentleman
It appears that former Auburn University Professor and Army Lt. Col., Loyd Frank Lawing, Jr didn't teach ethics. Then again, if it is true that those who don't, teach, maybe he did.
Mr. Lawing was the chapter advisor for Alpha Tau Omega and get this, "embezzled nearly all the fraternity’s funds" from June of 2002 to July of 2005. The frat must have been an animal house if Mr. Lawing was able to take all their funds over a 2 year period without anyone catching on.
Here's the dept. of Justice release.
http://www.usdoj.gov/usao/alm/Press/lawing_plea.html
Mr. Lawing was the chapter advisor for Alpha Tau Omega and get this, "embezzled nearly all the fraternity’s funds" from June of 2002 to July of 2005. The frat must have been an animal house if Mr. Lawing was able to take all their funds over a 2 year period without anyone catching on.
Here's the dept. of Justice release.
http://www.usdoj.gov/usao/alm/Press/lawing_plea.html
Wednesday, August 1, 2007
Real Estate investing and the Carried Interest Debate
Right now there is a big debate going on about the taxation of "Carried Interest". Evidently Congress thinks that this is going to be a big election issue and thus are trying to exploit it for all the publicity/press/votes they can.
Here is a link to some Congressional hearings on the subject
What is carried interest, and much more importantly, why should you care?
Carried interest is the hedge fund manager's short hand way of saying, compensation in the form of the investment partnership that you help manager.
If the compensation deal is structured correctly, the manager will receive profits distributions that will probably be considered long term capital gains. Thus they are able to drop their tax rate from around 35% (federal only) to 15%. This saves a lot of money if they are receiving millions of dollars of compensation.
Since these hedge fund managers are receiving millions of dollars in compensation, Congress figures they make easy targets and thus are trying to pass laws to tax the hedge funds manager's "carried interests" as ordinary income subject to norma tax brackets.
The problem here for RE investors is that while the fancy phrase of carried interest applies to big time hedge fund managers, many real estate investors do the exact same thing, but without the fancy title. In typical deals, the RE investor will find the deal, bring on a private investor to fund the deal, and split the profits 50/50.
Presumably the profits will be long term capital gains and thus the RE investor only a 15% tax on the profits.
If in fact the legislation passes, those profits will now be subject to taxes at the normal tax brackets.
Bottom line, ignorance isn't just bliss, its expensive.
Here is a link to some Congressional hearings on the subject
What is carried interest, and much more importantly, why should you care?
Carried interest is the hedge fund manager's short hand way of saying, compensation in the form of the investment partnership that you help manager.
If the compensation deal is structured correctly, the manager will receive profits distributions that will probably be considered long term capital gains. Thus they are able to drop their tax rate from around 35% (federal only) to 15%. This saves a lot of money if they are receiving millions of dollars of compensation.
Since these hedge fund managers are receiving millions of dollars in compensation, Congress figures they make easy targets and thus are trying to pass laws to tax the hedge funds manager's "carried interests" as ordinary income subject to norma tax brackets.
The problem here for RE investors is that while the fancy phrase of carried interest applies to big time hedge fund managers, many real estate investors do the exact same thing, but without the fancy title. In typical deals, the RE investor will find the deal, bring on a private investor to fund the deal, and split the profits 50/50.
Presumably the profits will be long term capital gains and thus the RE investor only a 15% tax on the profits.
If in fact the legislation passes, those profits will now be subject to taxes at the normal tax brackets.
Bottom line, ignorance isn't just bliss, its expensive.
Sunday, July 29, 2007
Somebody needs a Calendar
UNITED STATES OF AMERICA v. KIM is a great case to show people that mishaps and blunders happen all the time, many times at great expense and effort to the people involved.
This was a case where H. Kim, owed the government over $800,000 in taxes. In order to get its money, the government filed a motion to foreclose upon a piece of property that H. Kim owned, along with S. Kim (his son).
The government served them in June of 2006, and the Kim’s did not respond. The government then filed for an entry of default on Aug 14, 2006 with prompted both the Kim’s to answer. The court gave the Kim’s until November 14 to file answers, wth S Kim having until November 28 to respond to an action by the government.
Funniest thing happened on November 9th, 5 days before the deadline for the Kim’s, the district court granted the govts. motion for a default against S Kim, and ordered the marshals service to sell the property.
Don’t get me wrong, H. Kim owned the government the money, also he missed a number of deadlines himself, but the district court basically trampled any rights that S Kim had in the property. They told him he had until November 14th to respond, and yet entered a judgment against him on the 7th. Great justice system isn’t it.
Now, S Kim is forced to incur all sorts of attorney fees to appeal a ruling that was flawed to begin with. This brings to light an important truth of our legal system, if you don’t money, you don't have justice.
This was a case where H. Kim, owed the government over $800,000 in taxes. In order to get its money, the government filed a motion to foreclose upon a piece of property that H. Kim owned, along with S. Kim (his son).
The government served them in June of 2006, and the Kim’s did not respond. The government then filed for an entry of default on Aug 14, 2006 with prompted both the Kim’s to answer. The court gave the Kim’s until November 14 to file answers, wth S Kim having until November 28 to respond to an action by the government.
Funniest thing happened on November 9th, 5 days before the deadline for the Kim’s, the district court granted the govts. motion for a default against S Kim, and ordered the marshals service to sell the property.
Don’t get me wrong, H. Kim owned the government the money, also he missed a number of deadlines himself, but the district court basically trampled any rights that S Kim had in the property. They told him he had until November 14th to respond, and yet entered a judgment against him on the 7th. Great justice system isn’t it.
Now, S Kim is forced to incur all sorts of attorney fees to appeal a ruling that was flawed to begin with. This brings to light an important truth of our legal system, if you don’t money, you don't have justice.
Don’t count on those Depreciation Deductions
I can't tell you how many events/meetings/sales pitches I've attended, where the speaker is talking about the wonders of depreciation deductions. Typically they'll show you that you will be upside down on your monthly payments, but that is a good thing because. . . tadah, you get to take the depreciation write off on the property.
Being a tax dweeb, I always scratch my head and wonder, what about the passive activity loss limitations?
The taxpayers in HARMON v. COMMISSIONER are probably scratching their heads as well.
In 2001, the Harmon's incurred a 68K loss on their rental property. Logically enough, they fully deducted that loss on their return. One small problem though.
Under something called the passive activity loss rules, losses from a passive activity are not allowed unless some conditions are met. The one that a lot of us are famaliar with is that $25,000 of the losses are allowed each year, with that amount dropping by 50 cents for every dollar of adjusted gross income over $100,000.
A more favorable status is something called a real estate professional. Under the code someone could be a professional if they meet a 2 prong test:
(i) more than one-half of the personal services performed in trades or businesses by the taxpayer during such taxable year are performed in real property trades or businesses in which the taxpayer materially participates, and
(ii) such taxpayer performs more than 750 hours of services during the taxable year in real property trades or businesses in which the taxpayer materially participates.
The above time requirements really show that it isn't just attorneys who to tend to work 48 hour days, with full documentation, but high net worth types as well.
The reason I say that is the taxpayer must ultimately show that not only did they devote 750 hours to real estate work, but also that greater than 50% of the services provided by the taxpayer must be in the field of real estate. This really strains the credibility when the taxpayer is alreading working for someone else 40 hours a week.
That is exactly what happened in this case, not ony that, but the taxpayer already had 2 other jobs; one was a typical 40 hour work week job, the other was an adjunct professor at a business school. Hopefully she wasn't teaching ethics at the business school, as she testified that she only worked 8 hours a week, even though her payroll records showed she put in 2,080 hours.
You kind of have to wonder if she let her bosses know she was only working 8 hours a week.
I'll let you guess how this case turned out.
Bottom line, do not count on those real estate losses actually helping you lower your taxes unless you aren't making enough to really need the deductions, or you are legitimately devoting a lot of your time to your real estate investments.
Thursday, July 26, 2007
How the best of Plans Fail
Everyone knows about the absolute privacy that Nevada corps and offshore planning provide right?
Marketers go on to paint wonderful pictures of no one ever knowing what you are doing and you being able to have all your money grow perfectly protected, no taxes, no lawsuits, just good times sipping pina coladas on the beach!
Unfortunatly most of these privacy based plans typically come to light and rain financial chaos and destruction upon their creators.
Case in point, SPOTTS v. UNITED STATES OF AMERICA, in this case Mr. and Mrs Spotts implented what they thought was a great tax and asset protection scheme.
In 1994, they created a Nevada LLC to have their wages/commissions assigned to, then had that money flow offshore, all presumably without paying a dime in taxes. Then when they wanted to purchase a home, they had $180K of their money wired from an offshore bank to help purchase their home. They then filed a lien against their home for that amount so as to provide asset protection. Life was dreamy.
Unfortunatly maritial woes hit in 1998 and they got a divorce. Mr. Spotts divorce atty. recomended that he come clean with the IRS, and so Mr. Spotts filed amended tax returns for the years that he somehow overlooked certain amounts of income. The amount of back taxes he owed came out to be a paltry $375,000.
Our friends at the IRS, the understanding souls that they are waited until 2002 for Mr. Spotts to pay off his taxes. When they hadn't received their money, they placed a lien upon his home, and currently their is a court case to determine what portion of the home the IRS gets to take, and what portion Mrs. Spotts gets to keep (My guess is that Mrs. Spotts will probably try to file for innocent spouse relief).
What's the moral to this story? Do not use privacy as the basis of your asset protection and tax planning, there are a number of ways to use legitimate, code based, structures to help save taxes and provide asset protection. Otherwise, a spouse, significant other, partner invariably are going to get made at you and decide to reveal all to the proper authorities.
Marketers go on to paint wonderful pictures of no one ever knowing what you are doing and you being able to have all your money grow perfectly protected, no taxes, no lawsuits, just good times sipping pina coladas on the beach!
Unfortunatly most of these privacy based plans typically come to light and rain financial chaos and destruction upon their creators.
Case in point, SPOTTS v. UNITED STATES OF AMERICA, in this case Mr. and Mrs Spotts implented what they thought was a great tax and asset protection scheme.
In 1994, they created a Nevada LLC to have their wages/commissions assigned to, then had that money flow offshore, all presumably without paying a dime in taxes. Then when they wanted to purchase a home, they had $180K of their money wired from an offshore bank to help purchase their home. They then filed a lien against their home for that amount so as to provide asset protection. Life was dreamy.
Unfortunatly maritial woes hit in 1998 and they got a divorce. Mr. Spotts divorce atty. recomended that he come clean with the IRS, and so Mr. Spotts filed amended tax returns for the years that he somehow overlooked certain amounts of income. The amount of back taxes he owed came out to be a paltry $375,000.
Our friends at the IRS, the understanding souls that they are waited until 2002 for Mr. Spotts to pay off his taxes. When they hadn't received their money, they placed a lien upon his home, and currently their is a court case to determine what portion of the home the IRS gets to take, and what portion Mrs. Spotts gets to keep (My guess is that Mrs. Spotts will probably try to file for innocent spouse relief).
What's the moral to this story? Do not use privacy as the basis of your asset protection and tax planning, there are a number of ways to use legitimate, code based, structures to help save taxes and provide asset protection. Otherwise, a spouse, significant other, partner invariably are going to get made at you and decide to reveal all to the proper authorities.
Beltway Accounting
Other than a boy scout adventure over 38 years ago, I've never been to Washington D.C.
One of the more memorable individuals I've met in my life was a professional diner. His job was to invite "friends" out to dinner. Invariably the meal would be at a fairly nice resteraunt, also invariably, an industry rep, who was also a friend, would coincidentally be at the next table, and a lovely pitchfest, oops, conversation would ensue.
Just look at the following title, "In a July 25 report on the Children's Health and Medicare Protection Act, the Center on Budget and Policy Priorities found that"
Don't you just love the tite of this legislation, "Children's Health and Medicare Protection Act"? What is next, the "Fuzzy Puppy that Licks you in the face for Freedom Terrorist Torture Act"?
Then we get down to how this legislation is going to be paid for,
"The costs of the House bill are financed in part through a reduction in overpayments that Congress' expert advisory body on Medicare and the Congressional Budget Office have found are being made to private insurance companies participating in Medicare"
Did they actually put that in print?
This program is going to be financed by actually not overpaying insurance companies that are charging us too much? I think that if you asked people in Peoria about the above statement they would say that overcharging the government for Medicare payments is medicare fraud.
Can't say it enough no one cared about your money more than you do.
One of the more memorable individuals I've met in my life was a professional diner. His job was to invite "friends" out to dinner. Invariably the meal would be at a fairly nice resteraunt, also invariably, an industry rep, who was also a friend, would coincidentally be at the next table, and a lovely pitchfest, oops, conversation would ensue.
Just look at the following title, "In a July 25 report on the Children's Health and Medicare Protection Act, the Center on Budget and Policy Priorities found that"
Don't you just love the tite of this legislation, "Children's Health and Medicare Protection Act"? What is next, the "Fuzzy Puppy that Licks you in the face for Freedom Terrorist Torture Act"?
Then we get down to how this legislation is going to be paid for,
"The costs of the House bill are financed in part through a reduction in overpayments that Congress' expert advisory body on Medicare and the Congressional Budget Office have found are being made to private insurance companies participating in Medicare"
Did they actually put that in print?
This program is going to be financed by actually not overpaying insurance companies that are charging us too much? I think that if you asked people in Peoria about the above statement they would say that overcharging the government for Medicare payments is medicare fraud.
Can't say it enough no one cared about your money more than you do.
Wednesday, July 25, 2007
Tax Court Excitement
Currently playing to packed crowds in a Boston court house is the drama as to whether a sex change operation is a medical expense that can be deducted. Here is a link to a MSNBC article on the subject, picture included http://www.msnbc.msn.com/id/19793815/
Yep, tax wonks lead an exciting life.
During examination, the taxpayer (I use that term as I have no clue if I should say he or she) testified that they saw, "light at the end of the tunnel" when they had their male genitalia removed and breast implants inserted.
Ouch.
IRS cross generated compelling testimony such as that it could not have been medically necessary as the taxpayer put off the surgery until their youngest son went off to college.
Will keep you abrest of the latest details of this important case.
Yep, tax wonks lead an exciting life.
During examination, the taxpayer (I use that term as I have no clue if I should say he or she) testified that they saw, "light at the end of the tunnel" when they had their male genitalia removed and breast implants inserted.
Ouch.
IRS cross generated compelling testimony such as that it could not have been medically necessary as the taxpayer put off the surgery until their youngest son went off to college.
Will keep you abrest of the latest details of this important case.
Death of Common Sense?
When reading my updates this morning, saw that the Ways and Means Committee had a Hearing on Tax-Exempt Charitable Organizations.
When perusing this exciting testimony I cam across the following statement by the President of the Council of Foundations, in testimony to Congress:
"Let me be clear, the Council on Foundations is steadfastly opposed to the use of charitable vehicles for the support of terrorist activities at any time in any place."
Have things gone so far that we have to state the painfully obvious? What exactly caused the the CEO of the Council on Foundations to have to make such a statement?
You guessed it, in response to bureaucratic guidelines. In particular something that those in the know call U.S. D T A -T F G V B P U.S.-B C. . . seriously, Google it and laugh.
One of the better quotes from these guidelines is,
"List-checking alone (as described throughout this section) does not guarantee the safe and secure delivery of charitable funds and services in high-risk areas. For this reason, the Guidelines encourage charities to employ all reasonably available resources both when determining the level of risk in a particular charitable operation and when engaging in appropriate vetting procedures. One example of publicly available information of which charities should be aware is the Terrorist Exclusion List"
Uhhh, the govt. says list checking isn't good enough so to increase effectiveness check another list? With authors like this, is it any wonder no one really understands the rules?
When perusing this exciting testimony I cam across the following statement by the President of the Council of Foundations, in testimony to Congress:
"Let me be clear, the Council on Foundations is steadfastly opposed to the use of charitable vehicles for the support of terrorist activities at any time in any place."
Have things gone so far that we have to state the painfully obvious? What exactly caused the the CEO of the Council on Foundations to have to make such a statement?
You guessed it, in response to bureaucratic guidelines. In particular something that those in the know call U.S. D T A -T F G V B P U.S.-B C. . . seriously, Google it and laugh.
One of the better quotes from these guidelines is,
"List-checking alone (as described throughout this section) does not guarantee the safe and secure delivery of charitable funds and services in high-risk areas. For this reason, the Guidelines encourage charities to employ all reasonably available resources both when determining the level of risk in a particular charitable operation and when engaging in appropriate vetting procedures. One example of publicly available information of which charities should be aware is the Terrorist Exclusion List"
Uhhh, the govt. says list checking isn't good enough so to increase effectiveness check another list? With authors like this, is it any wonder no one really understands the rules?
Tuesday, July 24, 2007
Not so Innocent Spouse
Funny case came out today. Victoria K.M. Freulich v. Commissioner.
In this case, the wife won $5,000 at a casino. For some reason or another she didn't repor the income on her tax return (she had a memory lapse on income interest of $ 27 and dividends of $ 17 as well).
Fast forward a few years, and the death of her husband, what does she try to do? She tried to claim innocent spouse status. Basically this is where one spouse didn't know about the other spouse's tax sheningans and thus it would be unjust to make the "innocent spouse" liable for the actions of the offending spouse.
Slight problem with her defense, she was the offending spouse.
Truth is stranger than fiction.
In this case, the wife won $5,000 at a casino. For some reason or another she didn't repor the income on her tax return (she had a memory lapse on income interest of $ 27 and dividends of $ 17 as well).
Fast forward a few years, and the death of her husband, what does she try to do? She tried to claim innocent spouse status. Basically this is where one spouse didn't know about the other spouse's tax sheningans and thus it would be unjust to make the "innocent spouse" liable for the actions of the offending spouse.
Slight problem with her defense, she was the offending spouse.
Truth is stranger than fiction.
Hidden Taxes
Recently there was an article about the House passing legislation to defer a 3 percent withholding requirement for payments made by any federal, state or local governments for goods and services was about to be delayed.
Huh?
Now I like to think that I know a thing or two about taxes, but I had never heard of any such tax. Upon further investigation, the law is as simple as it is stupid. In order to raise revenue, Congress implemented the law that would impose a 3% withholding on the gross amount of any payments from a government entity to a taxpayer.
One example on the internet pretty much showed the incredible unfairness of the rule,
"For example, a small business contractor may hold one government contract which is estimated to be completed in one year for $1 million. Section 511 would require the government entity to withhold 3 percent, or $30,000, of the $1 million payment. For argument's sake, let's assume the contractor earns a 3 percent profit — which approximates the national average in construction contracts — on the project. That means the contractor would expect a profit of $30,000, or 100 percent of the amount withheld. Let's further assume that the contractor is taxed at the top corporate income tax rate — currently 35 percent. Because businesses are taxed only on their profits, the tax liability on this $1 million project would be $10,500. So in effect, the contractor would float the Federal government an interest-free loan for $19,500 on this particular project." http://www.abc.org/wmspage.cfm?parm1=6941
This is a law that needs to be wiped out.
Huh?
Now I like to think that I know a thing or two about taxes, but I had never heard of any such tax. Upon further investigation, the law is as simple as it is stupid. In order to raise revenue, Congress implemented the law that would impose a 3% withholding on the gross amount of any payments from a government entity to a taxpayer.
One example on the internet pretty much showed the incredible unfairness of the rule,
"For example, a small business contractor may hold one government contract which is estimated to be completed in one year for $1 million. Section 511 would require the government entity to withhold 3 percent, or $30,000, of the $1 million payment. For argument's sake, let's assume the contractor earns a 3 percent profit — which approximates the national average in construction contracts — on the project. That means the contractor would expect a profit of $30,000, or 100 percent of the amount withheld. Let's further assume that the contractor is taxed at the top corporate income tax rate — currently 35 percent. Because businesses are taxed only on their profits, the tax liability on this $1 million project would be $10,500. So in effect, the contractor would float the Federal government an interest-free loan for $19,500 on this particular project." http://www.abc.org/wmspage.cfm?parm1=6941
This is a law that needs to be wiped out.
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