Taxes August 6, 2013
Tanning Tax Is Racist, Says Guy Somehow Elected to Congress
Ted Yoho is calling attention to the injustices in this country on behalf of Florida's 3rd Congressional District: Rep. Ted Yoho (R-Fla.) said the 10 percent tax on the use of indoor tanning facilities was discriminatory, and that he had said as much to Speaker John Boehner (R-Ohio), according to audio posted by Right Wing […]
Taxes September 20, 2012
Ways and Means Committee Isn't Even Trying Anymore
As you know, the so-called* fiscal cliff is looming* over us all. The prospect of tax increases and spending cuts has everyone freaked. Our elected officials are in full campaign mode, yet still manage to o attend committee meetings to discuss and debate policy of the utmost importance in order to reach a compromise for […]
IRS September 18, 2012
Audit Finds That IRS Small Business Division Not So Different From That Attractive Person at the Bar Who Seemed Really Interested in You
They say they'll call and meanwhile you sit by the phone like an IDIOT. TIGTA […] found that examiners are trained and monitored to ensure they provide accurate information to taxpayers, but they do not consistently return calls when requested by or promised to taxpayers. TIGTA identified 20 calls during which the taxpayer either requested […]
Marco Rubio Manages to Introduce the Most Unimaginative, Transparent, Populist Tax Legislation Possible
Jesus. I know the guy is angling for VP, but this…this is trying WAY too hard: Rubio introduced the Olympic Tax Elimination Act, which exempts Olympic medal recipients from having to pay taxes on the medals they won. When athletes win Olympic medals they also win honorariums. Gold medal winners receive $25,000, silver medal winners […]
Taxes January 10, 2012
Congress Isn't Interested in Discussing the Payroll Tax Cut Right Now
House Republicans on Tuesday declined to recognize a House Democrat who was trying to speak about the need for Congress to quickly resolve its differences about how to extend the payroll tax cut. Rep. Robert Aderholt (R-Ala.) gaveled today's pro forma session to order at about 2 p.m. After the House prayer and Pledge of […]
Taxes October 21, 2011
Congressman Jeb Hensarling Still Confused About the Meaning of the Expression "Everything is on the table."
"Listen, we are not keeping anything off the table but I can assure you we are not bringing tax increases to the table," he said. [OTM/The Hill]
Taxes July 11, 2011
Indiana Department of Revenue Will Waffle on Whether It Wants Your Overdue Taxes If It Damn Well Pleases
Taxes are difficult. Given. Even for the professionals that deal with them every day, it can be an exhausting mental exercise that will inevitably lead to mistakes. Example: Back in 2003, Indiana's Department of Revenue ("DOR") sent a $1.1 million refund to Aisin USA Manufacturing for its 2001 return. Aisin filed an amended return to show this refund only to have the DOR inform the company that a "clerical error" had been made and the company actually owed over $600k. Aisin wasn't exactly thrilled with this and, citing the statute of limitations, told Indiana to drop dead. Surprisingly, this seemed to work:
The company then received a letter from DOR stating, "Your recent explanation and/or payment, with respect to the specific liability number referenced above, is satisfactory. No further action is required on your part for this liability."
Then, not unlike the girlfriend who decides to change her outfit the moment you're working out the door, the state took it back:
[I]n 2007 and 2008, the DOR notified Aisin that they actually did have to pay the disputed sum.
The state gave the company a break, cutting the amount due by about $70k but begrudgingly added, "Aisin's continued wrongful retention of this amount d[id] not represent the action of a responsible corporate citizen."
Long story, short – the DOR sued Aisin to get the taxes due in trial court because it hadn't jumped through all the hoops necessary to submit the case in tax court. The Court of Appeals wasn't impressed by this but ultimately the Indiana Supreme Court said everything was kosher and ruled in favor of the state and is now going back to Superior Court.
So, there are lots of lessons here. It appears that Indiana's DOR can 1) make really bad mistakes; 2) decide those mistakes are NBD; 3) can change their minds and conclude that, mistakes or not, you owing them money is a BFD; 4) don't feel the need to follow their own rules.
And they ultimately win the right to continue a battle over half a million bucks that has been going on for almost ten years. Seems about right.
Indiana Department of Revenue Rivals the Ministry of Silly Procedures in Tax Refund Case [Tax Foundation]
Zoeller v. Aisin USA Manufacturing, Inc. [Justia]
IRS April 11, 2011
A Prison Guard Is Now Equally as Effective at Busting Tax Cheats as the IRS
As we have learned, residents of our prison system have proven to be quite savvy at obtaining tax credits, including those intended for first-time homebuyers, alternative-fuel vehicles as well as filing bogus tax returns in order to receive refunds. These scams go along swimmingly until the IRS gets wind of it (anywhere from months to years later), at which time local (and sometimes national) media have some nice filler.
In the latest case of a prisoner tax schemed sniffed out, Troy Fears – who is enjoying a life's stay in an Arizona prison for rape – spent 2005 to 2009 filing fake tax returns and obtained $119k in the process. He was using "fake W-2's and apparently said he was filing other inmates' taxes. He convinced other prisoners he was applying for grants on their behalf so he could get their Social Security numbers." According to court papers, the IRS was missing this particular scam because "IRS routes [direct deposits] without making sure the name on the account matches the return." The jig was up when a prison guard intercepted his mail, presumably figured out the tax returns were fakes, and called the authorities. Fears got four years tacked on to his sentence and the guard responsible for catching him can probably expect a "Deputy IRS Agent" certificate (signed by Doug Shulman, natch) in the mail any day now.
Jailed Rapist Gets $119K From Fake Tax Returns [KPHO via TaxProf]
Report: IRS Is Better at Junking Computers From Previous Decades
It appears that the IRS prompted this report from the Treasury Inspector General of Tax Administration after a previous report stated that improvements were needed in the replacing the Service's dinosaur technology.
Employees have to be pleased that can now obtain better equipment to do their jobs, although three years to determine how to point out an Apple II or an IBM running DOS does seem like a long time.
The Internal Revenue Service (IRS) has significantly improved its ability to identify and replace aging computers, according to a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).
The IRS purchases new computers to replace aging equipment through its Sustaining Infrastructure Program. A November 2007 TIGTA report recommended several improvements to the IRS's processes for replacing computer hardware that has reached or surpassed its useful life. TIGTA conducted the review at the IRS's request.
TIGTA's new report found that the IRS has implemented a process for identifying, reviewing, prioritizing, and making decisions on funding the replacement of aged computer hardware and is developing the capability to associate information technology problems with the aged hardware that caused the problem. The improved capability could result in as much as $12.3 million in cost savings and $16.4 million in revenue collection increases, according to the report.
"Taxpayers and IRS employees rely heavily on the information technology infrastructure to ensure satisfaction of tax liabilities, quick resolution of issues, and the security of confidential taxpayer information," said J. Russell George, the Treasury Inspector General for Tax Administration. "The IRS is to be commended for these improvements," he added.
Not-So-Subtle Political Ad of the Day: Louisiana Taxpayer Dollars Paid for David Ritter's Hookers
He was calling them during important votes!
With less than a week to go until the election and Vitter leading by about 16 points, Charlie Melancon figures this particular line of attack can't hurt anything.
Melancon Ad: Vitter Used Taxpayers' Money To Pay For Prostitutes [TPM]
Taxes August 17, 2010
Tax Reform Suggestions Will More or Less Encompass Every Idea, Ever
Despite other pressing issues out there, such as, whether a Muslim community center is too closeto Ground Zero or if it's just a religious revival of an old Burlington Coat factory, the matter of tax reform managed to creep back into the news late last week.
The President's Economic Recovery Advisory Board plans on dropping some suggestions on fixing our tax system on August 27th. This comes after the getting suggestions from the American people but then stalling a little bit on the issue.
Now that some recommendations are scheduled to be made public the Journal suggests that the timing isn't ideal for an election year but also mentions that while there's going to be plenty of idea put out there, no real solutions are going to be recommended:
But the timing of the release just before the Labor Day weekend suggests that the administration might be trying to downplay it. Many Democrats say tax hikes are inevitable if the government is to bring down the federal deficit, expected to total about $1.5 trillion this year, but that option remains politically sensitive, given the high jobless rate and ahead of November's mid-term elections.
According to the Treasury Department, the report will offer "an almanac of options from a broad range of viewpoints," but won't make specific policy recommendations. It will discuss ideas related to simplifying the tax code, strengthening enforcement and overhauling the corporate tax system, the department said.
An 'almanac of ideas' will no doubt incorporate all ideas on tax reform floated by anyone, anywhere so that it can appear that people are trying really hard to come up with a solution without making anything too politically awkward. In other words, business as usual.
White House Panel to Issue Tax-Overhaul Report Aug. 27 [WSJ]
News August 4, 2010
Apparently Some Stimulus Funds Will Buy Cocaine for Monkeys
Among other things.
Watch the latest video at video.foxbusiness.com
The real question is where does Al Lewis get the stuff that he's on?
Taxpayer Funds Used to Fund Cocaine in Monkeys Study [FBN]
IRS July 28, 2010
The TIGTA Would Prefer It if the IRS Could Use a Nicer Term Than "Tax Protester"
Back in 1998 when some of you were just starting your careers, some of you were discovering alcohol and some of you still hadn't hit puberty, Congress enacted the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98). In Section 3707 of this piece of legislative ingenuity, the IRS is prohibited from using the term "illegal tax protesters or any similar designations."
Why no name calling? The TIGTA claims it "may stigmatize taxpayers and may cause employee bias in future contacts with these taxpayers." Plus, it really hurst people's feelings.
This latest edition of government-mandated IRS bashing especially seems like a stretch since this "problem" of calling a spade a spade isn't that widespread:
We found that, out of approximately 80.6 million records and cases, there were 196 instances in which employees had labeled taxpayers as "Tax Protester," "Constitutionally Challenged," or other similar designations in case narratives on the following computer systems during the period of October 2008 through September 2009[.]
For starters, "Constitutionally Challenged" sounds like something you might apply to a Tea Party member. Secondly, you can do the math on the 196 instances out of 80-odd million but the concern on the part of the Inspector General might be overblown.
Luckily for us citizens, we can throw around any term we want with reckless abandon and there's no repercussions. That being said, the TIGTA didn't make any recommendations to the IRS on how to curb the usage of axtay rotestorpay and the IRS didn't buy the Inspector's story that the 196 instances were, in fact, violations. So, if you've come to the conclusion that this TIGTA report was the biggest waste of time and tax dollars in the history of the Treasury Department, you probably wouldn't be far off.
Fraud June 23, 2010
A Lifetime Prison Sentence Won't Prevent You from Qualifying for the Homebuyer Tax Credit
Oh the glorious first-time homebuyer tax credit. Championed by Congressional Leaders, popular with Americans and ripe with fraud.
No legislation is perfect though, amiright? You've got to take the good with the bad. The latest of the bad comes courtesy of everyone's favorite bureaucratic nagging mother-in-law, the Treasury Inspector General for Tax Administration. The TIGTA has come out with a new report that shows that the FTHBTC program hasn't really gotten any better at weeding out the unscrupulous activity.
TIGTA estimates that 14,132 individuals received erroneous credits totaling at least $26.7 million. These erroneous credits included:
• 2,555 taxpayers receiving credits totaling $17.6 million for homes purchased prior to the dates allowed by law.
• 1,295 prisoners receiving credits totaling $9.1 million who were incarcerated at the time they reported that they purchased their home. These prisoners did not file joint returns, so their claims could not have been the result of purchases made with or by their spouses. Further, TIGTA found that 241 prisoners were serving life sentences at the time they claimed that they bought new primary residences.
•10,282 taxpayers receiving credits for homes that were also used by other taxpayers to claim the credit. (In one case, TIGTA found that 67 taxpayers were using the same home to claim the credit.) TIGTA auditors have not fully quantified the total of these erroneous credits, but all indications are that the total will be in the tens of millions of dollars.
But wait! There's good news! Inspector General J. Russell George was happy to report that there has been improvements, "The good news is that the IRS has made significant strides resolving problems associated with this program. For example, no minors received the Credit, according to our report."
Progress! They've managed to keep the under-eighteen crowd under control. But do we prefer this to prisoners doing life getting our tax dollars? Seems like a toss-up.
Errors, Fraud Still Occur in First-Time Homebuyer Credit Program [TIGTA]
News June 18, 2010
Spending $1.25 Million on Bridges for Squirrels Isn't the Worst Idea Arizona Has Ever Had
Okay, so Arizona is spending $1.25 million to build bridges for the endangered Mount Graham red squirrel and of course a bunch of people are in a big huff.
ABC News reports that without the bridges, approximately five squirrels would be killed a year and there are only 250 are known to be in existence.
Yes, that works out to $5,000 a squirrel but considering the fact that animals are far more responsible and respectful inhabitants of the planet than humans, we've got no beef with this.
Especially considering the fact that Arizona has had far worse ideas in its history including opposing Martin Luther King Day until 1992, its asinine immigration policy and the Phoenix Coyotes.
Arizona Spends $1.25M to Save 250 Squirrels [ABC News via Tax Policy Blog]
Fraud June 2, 2010
GAO Audit Uncovers Fraud at Head Start Programs
by Adrienne Gonzalez
The Head Start Program, under the Department of Health and Human Services, provides child development services to mostly low-income families and their children. Up to 10% of Head Start-enrolled families can be over-income, with an income 130% above the poverty line.
Of course, things don't always work out as they are supposed to and the GAO has discovered problems with about half of the centers it examined through the investigation, just a small sample of the 1,600 nonprofit centers running 3,000 Head Start programs.
From the GAO:
GAO received allegations of fraud and abuse involving two Head Start nonprofit grantees in the Midwest and Texas. Allegations include manipulating recorded income to make over-income applicants appear under-income, encouraging families to report that they were homeless when they were not, enrolling more than 10 percent of over-income children, and counting children as enrolled in more than one center at a time. GAO confirmed that one grantee operated several centers with more than 10 percent over-income students, and the other grantee manipulated enrollment data to over-report the number of children enrolled. GAO is still investigating the other allegations reported. Realizing that these fraud schemes could be perpetrated at other Head Start programs, GAO attempted to register fictitious children as part of 15 undercover test scenarios at centers in six states and the District of Columbia. In 8 instances staff at these centers fraudulently misrepresented information, including disregarding part of the families' income to register over-income children into under-income slots. The undercover tests revealed that 7 Head Start employees lied about applicants' employment status or misrepresented their earnings.
GAO managing director for special investigations Gregory Kutz told a House education committee last month that "the system is vulnerable to fraud." No kidding.
While unable to determine the motivation of Head Start employees to commit fraud by adjusting income levels on applications, Kutz theorized that management of nonprofit agencies receiving Head Start funds pressured staff to fudge, fiddle with, or straight up fake figures on applications in order to keep federal funds coming in.
Head Start has served over 25 million children since 1965 and there are currently over 1 million children enrolled in Head Start programs.
Adrienne Gonzalez is the founder of Jr. Deputy Accountant, a former CPA wrangler and a Going Concern contributor . You can see more of her posts here.
IRS March 16, 2010
IRS Not Just Going After Loose Change: Audits of Millionaires Rising
So this morning we learned that some IRS Agents decided to get huffy with a taxpayer over a sum that was less than a sketchy gas station party favor.
With this in mind, the more affluent of you may think that the IRS was finally recognizing that the millionaires in this country are the ones that make things happen. If the IRS would just BTFU and let the rich do their thing we'd get this economy back to blowing asset bubbles.
Unfortunately, Doug Shulman has remained steadfast in his commitment to making millionaires' life hell by virtue of increasing the number of IRS audits on the wealthy.
According to a report in the New York Times, audits of individuals that earn at least $1 million are way up, "The federal agency increased its audits of taxpayers who earned $1 million to $5 million by 33 percent last year compared with 2008." And if you're in an even higher class of Joneses, your chances of getting audited are going up too, "[T]he I.R.S. increased its audits by 16 percent for those earning $5 million to $10 million last year. Audits of those who made at least $10 million rose by 8.5 percent, according to the data."
The Times quotes a tax expert, Richard Boggs of Nationwide Tax Relief who then says the unthinkable (our emphasis):
"The I.R.S. is getting smart," he said. "They are starting to better leverage their time, resources and talent in order to collect the most money. There is a definite shifting of the tide." He said audits of those making at least $10 million rose slightly less than for other categories because so many of the ultrawealthy were already being audited.
We're sure Mr Boggs is a top-notch tax guru but there is strong evidence that suggests that the IRS will still try to collect less substantial sums.
However, we have to admit, the numbers don't lie. Millionaires out there, your chances of getting audited are going up and that sucks. But what should make everyone really nervous is the Service attempting to collect your loose change. Next time you see a nickel on the ground, we suggest you leave it there.
I.R.S. Says Its Audits of Wealthy Are Rising [NYT]
News March 1, 2010
SHOCKER: GAO Says the Federal Government Has Weak Internal Controls
Talk about a blow. Everyone here at GC soiled themselves after finding out this piece of news.
The mother of all auditors, the General Accountability Office, released its FY 2009 Financial Report for the U.S. Government last week and things are, shall we say, typical. How typical? How about things are such a mess that the GAO can't render an opinion on the consolidated financial statements?
"The U.S. Government Accountability Office (GAO) could not render an opinion on the consolidated financial statements of the federal government (other than the Statement of Social Insurance) because of widespread material internal control weaknesses and other limitations."
That's from the press release and while we were expecting a shitshow spread amongst all the agencies of the government, it's due to the weaknesses in four agencies: the Defense Department, Homeland Security, State Department, and NASA.
Here's the full rundown on the agencies from the report:
You may remember us noting the Defense Department's audit problems back in the fall when we said:
For one of the 69 reviews the GAO performed, the audit report cited eight significant deficiencies in the contractor's accounting system but since the contractor wasn't really cool with that, the auditors dropped five of the [significant deficiencies] and recommended that the other three be "improved without additional work".
So this really, really, really does come as a surprise. It is good to know that the GAO — never shy on tooting its own horn — is still out there earning it's "taxpayer watchdog" badge.
At 256 pages, this thing is a beast. We're plowing through it to find the more interesting tidbits where we can and if you're on cruise control today, take a gander for yourself to see your tax dollars at work.
Fiscal Year 2009 Financial Report of the United States Government [GAO.gov]
U.S. Government's 2009 Financial Report Shows Significant Fiscal Challenges [Press Release]
GAO Cites Weak Financial Management in Federal Government [Web CPA Debits & Credits]
Fraud February 15, 2010
At Blackwater, Strippers and Hookers are Legitimate Expenses
Allegedly of course!
It's bad enough when even the Iraqis are saying GTFO but that's exactly what's happened to about 250 ex-Blackwater employees still lingering around Iraq. "I don't think the Iraqi government is willing to have any Blackwater member, even if they are working in other companies," government spokesman Ali al-Dabbagh told CNN in January."
But it isn't just the Iraqis with a Blackwater bone to pick – former Blackwater employees allege the security firm hired strippers, prostitutes, and "incompetent personnel" to defraud authorities while working security details in Iraq and Afghanistan, as well as in post-Katrina Louisiana.
WTF is going on here? If you're going to rip off the federal government, I guess it's good to get your money's worth, especially if you know their internal controls are for shit.
Melan Davis, who was involved in record-keeping, said Blackwater billed the government for prostitution services in Afghanistan from a Filipino female, whose name was on Blackwater's payroll roster under a category called "Morale Welfare Recreation."
She said Blackwater billed the woman's plane tickets and monthly salary to the United States.
The lawsuit also said a vendor being paid for "cleaning services" in Louisiana was providing strippers.
Blackwater spokespeople (the company is now known as Xe, though we won't pontificate as to why another rebranding might be appropriate at this time) claim Davis must be trippin'. Strippers? Hookers? Fake receipts? No way!
"The allegations are without merit and the company will vigorously defend against this lawsuit. It is noteworthy that the government has declined to intervene in this action," Xe told CNN.
This is not the first time Blackwater has been accused of defrauding the government; California's Henry Waxman (D) accused the contractor of running a tax scheme to avoid paying what his staffers estimated as $15.5 million in Social Security and Medicare taxes, $15.8 million federal income tax withholding and $500,000 in unemployment taxes between May 2006 and March 2007.
So? What's worse? Not paying taxes or expensing "Morale Welfare Recreation" on Uncle Sam's dime?
Taxes February 10, 2010
What Are Your Taxes Buying Hollywood?
by Joe Kristan
The former head of the Iowa Film Office was charged this week with "unfelonious misconduct in office" for his role in a scandal in which filmmakers bought themselves everything from featherbeds to Benzes with money advanced by the taxpayers of Iowa.
The Hawkeye State fell big time for the film credit fad that swept the country in recent years. Iowa had two 25% tax credits, one for filmmakers and one for investors. As interpreted by Mr. Wheeler (but not the Attorney General), the credits together could add up to 50% of film costs incurred in state, making it perhaps the most generous such giveaway in the country.
Better yet, the credits are transferable, so filmmakers can sell them at a discount to raise money. The program had no caps, meaning that Iowa could give away money as fast as Hollywood could spend it.
The entire program was managed by Mr. Wheeler, almost by himself. And did he ever manage it. According to the Iowa Attorney General:
Defendant Wheeler permitted filmmakers… to utilize "payments in kind" including "services in kind" in support of claimed expenditures for tax credits. Under defendant Wheeler's direction, Iowa's film program became one of the few, if not the only, state film incentive program in the nation to allow credit for "services in kind."…Examples included "sponsorship agreements" in which intangible assets (such as reciprocal web links, product placement and marketing agreements) were traded with no money changing hands. These non-cash "expenditures" sometimes constituted the majority of the filmmakers entire alleged budget.
For a brief glitzy moment, Iowa was overrun with film crews and starlets helping themselves to a bountiful harvest.
The party ended last fall with revelations that Iowans helped buy a Mercedes and a Land Rover for a producer via film credits. Mr. Wheeler lost his job, and now he stands charged with a "serious misdemeanor." Two filmmakers are charged with felony theft for inflating their expenses while claiming credits.
But if Mr. Wheeler is criminally inept, what about the bosses that left him alone and unsupervised to give away over $30 million so far? And what about the 147 legislators — out of 150 — who thought it would be a good idea to give Hollywood a blank check? And you thought "Music Man" was fiction.
But lest you think too badly about the rubes in Iowa, forty-four states are giving taxpayer money to Hollywood. Chances are that your legislator is taking money from you and giving it to those nice Hollywood people. Remember that next time your legislator says you aren't paying enough taxes.
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