Tax Law Forum

Friday's Tax Quote - February 3, 2012

2012-02-03T12:49:00.000-06:00

“Tax reform is ultimately a decision about values.”

- Bill Bradley

Friday's Tax Quote - January 27, 2012

2012-01-27T14:48:00.000-06:00

“Why is it inflationary if the people keep their own money, and spend it the way they want to, [but] not inflationary if the government takes it and spends it the way it wants to?”

- Ronald Reagan

Friday's Tax Quote - January 20, 2012

2012-01-20T12:47:00.000-06:00

“I know everybody’s income and what everybody earns;
And I carefully compare it with the income-tax returns;
But to benefit humanity, however much I plan,
Yet everybody says I’m such a disagreeable man!
And I can’t think why!”

- William D. Gilbert and Arthur S. Sullivan (“Princess Ida”)

The Wisconsin Department of Revenue’s "My Tax Account."

2012-01-15T14:41:00.000-06:00

The Wisconsin Department of Revenue is continuing its push to encourage business taxpayers to manage their tax obligations online by using the "My Tax Account" system. The system is set up to be simple and easy to use. In addition to filing and paying numerous types of taxes online, registered users can also use the system to appeal various Department of Revenue notices.

An existing or new business can register for and access "My Tax Account" by clicking here. FAQs are answered by clicking here. The Wisconsin Department of Revenue has also produced six simple, but useful, instructional videos that can be viewed in a continous stream by clicking here or watching below:

Video 1:

Video 2:

Video 3:

Video 4:

Video 5:

Video 6:

Obviously, online tax compliance will only become more and more commonplace. It is my recommendation that those who have not yet begun using these services do so in the near future.

Friday's Tax Quote - December 30, 2011

2011-12-30T12:00:00.002-06:00

“The income tax created more criminals than any other single act of government.”

- Barry M. Goldwater

Friday's Tax Quote - December 23, 2011

2011-12-23T12:00:00.000-06:00

“The sales tax seems to be more politically acceptable than the income tax.”

- Raymond C. Scheppach

Friday's Tax Quote - December 16, 2011

2011-12-16T12:00:00.002-06:00

“Any tax is a discouragement and therefore a regulation so far as it goes.”

- Oliver Wendell Holmes Jr.

Friday's Tax Quote - December 9, 2011

2011-12-09T12:00:00.001-06:00

“I want to find out who this FICA guy is and how come he’s taking so much of my money.”

- Nick Kypreos

Friday's Tax Quote - December 2, 2011

2011-12-02T12:00:00.001-06:00

“Politicians never accuse you of ‘greed’ for wanting other people’s money – only for wanting to keep your own money.”

- Joseph Sobran

Friday's Tax Quote - November 18, 2011

2011-11-18T12:00:00.002-06:00

“We contend that for a nation to try and tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by its handle.”

- Winston Churchill

Friday's Tax Quote - November 11, 2011

2011-11-11T12:00:00.001-06:00

“If you want more of something, subsidize it; if you want less, tax it.”

- Old Economic Adage

Friday's Tax Quote - November 4, 2011

2011-11-04T12:00:00.002-05:00

“Abracadabra, thus we learn
The more you create, the less you earn.
The less you earn, the more you’re given,
The less you lead, the more you’re driven,
The more destroyed, the more they feed,
The more you pay, the more they need,
The more you earn, the less you keep,
And now I lay me down to sleep.
I pray the Lord my soul to take,
If the tax-collector hasn’t got it before I wake.”

- Ogden Nash

Friday's Tax Quote - October 28, 2011

2011-10-28T12:00:00.002-05:00

“Every society makes choices as to the tax systems that not only raise the necessary revenues to support government expenditures, but within that choice are inherent reflections of societal values. Not only does a society choose a tax system but the tax system becomes one of the basic institutions that in itself shapes and molds the society.”

- Karen M. Yeager

Friday's Tax Quote - October 21, 2011

2011-10-21T12:00:00.000-05:00

“Count the day won when, turning on its axis,
This earth imposes no additional taxes.”

- Franklin P. Adams

Friday's Tax Quote - October 14, 2011

2011-10-14T12:00:00.000-05:00

“We understandably hesitate to talk about law in explicitly moral terms. But tax has unavoidable moral and political dimensions.”

- Edward J. McCaffery

Friday's Tax Quote - October 7, 2011

2011-10-07T12:00:00.001-05:00

“I hate taxes
Taxes gonna break my back I swear
Don’t you know I paid a lot more than my share
You know I’m thinkin’ about movin’ somewhere else
But I can’t because I love America too much
Especially California
Yeah I guess I’m gonna have to pay these taxes
If I’m gonna live here.”

- Robert Cray (“1040 Blues”)

Friday's Tax Quote - September 30, 2011

2011-09-30T12:00:00.001-05:00

“The tax man’s taken all my dough
And left me in this stately home
Lazing on a sunny afternoon
And I can’t even sail my yacht
He’s taken everything I’ve got
All I got’s this sunny afternoon.”

- Ray Davies (“Sunny Afternoon”)

Friday's Tax Quote - September 23, 2011

2011-09-23T12:00:00.001-05:00

“What Mae West said about sex is true about taxes. All tax cuts are good tax cuts; even bad tax cuts are good tax cuts.”

- Grover Norquist

Friday's Tax Quote - September 16, 2011

2011-09-16T12:00:00.001-05:00

“Like mothers, taxes are often misunderstood, but seldom forgotten.

- Lord Bramwell

Friday's Tax Quote - September 9, 2011

2011-09-09T12:00:00.001-05:00

“If you get up early, work late, and pay your taxes, you will get ahead – if you strike oil.”

- J. Paul Getty

Friday's Tax Quote - September 2, 2011

2011-09-02T12:00:00.001-05:00

“The wages of sin are death, but by the time taxes are taken out, it’s just sort of a tired feeling.”

- Paula Poundstone

Friday's Tax Quote - August 26, 2011

2011-08-26T12:00:00.001-05:00

“I thought at first that the power of taxation [given in the new Federal constitution] might have been limited. A little reflection soon convinced me it ought not to be.”

- Thomas Jefferson

Friday's Tax Quote - August 19, 2011

2011-08-19T12:00:00.002-05:00

“The expenses of government, having for their object the interest of all, should be borne by everyone, and the more a man enjoys the advantages of society, the more he ought to hold himself honored in contributing to those expenses.”

- Anne Robert Jacques Turgot

Friday's Tax Quote - August 12, 2011

2011-08-12T12:00:00.001-05:00

“I think our tax system is not worthy of an advanced society.”

- Paul H. O’Neill

Friday's Tax Quote - August 5, 2011

2011-08-05T12:00:00.001-05:00

“I like to pay taxes. With them I buy civilization.”

- Oliver Wendell Holmes Jr.

Friday's Tax Quote - July 29, 2011

2011-07-29T12:00:00.001-05:00

“And it came to pass in those days, that there went out a decree from Caesar Augustus that all the world should be taxed.”

- New Testament

Friday's Tax Quote - July 22, 2011

2011-07-22T12:00:00.002-05:00

“[T]o tax and to please, no more than to love and to be wise, is not given to men.”

- Edmund Burke

Friday's Tax Quote - July 15, 2011

2011-07-15T12:00:00.002-05:00

“Trade being a sensitive plant, a direct tax upon it to some extent at least deters trade even if its effect is not precisely calculable”

- Felix Frankfurter

Friday's Tax Quote - July 8, 2011

2011-07-08T12:00:00.001-05:00

“The law of taxation is more concerned with the substance of economic opportunity than with classifying legal concepts, and tagging them with names and labels.”

- Benjamin N. Cardozo

Friday's Tax Quote - July 1, 2011

2011-07-01T12:00:00.002-05:00

“There are some taxes that are good for our economy, because they discourage harmful activities.”

- David M. Roodman

Friday's Tax Quote - June 24, 2011

2011-06-24T12:00:00.000-05:00

“Taxes, after all, are dues that we pay for the privileges of membership in an organized society.”

- Franklin D. Roosevelt

Friday's Tax Quote - June 17, 2011

2011-06-17T12:00:00.001-05:00

“When Jesus tells his audience to ‘render to Caesar’ his point is not that they should pay their taxes like dutiful Roman citizens; his point is that they should be rendering their selves to God. When it comes to what people owe God, Jesus is saying, we are all in the very highest tax bracket…”

- David T. Ball

Friday's Tax Quote - June 10, 2011

2011-06-10T12:00:00.001-05:00

“Taxes grow without rain.”

- Old Jewish Proverb

Friday's Tax Quote - June 3, 2011

2011-06-03T12:00:00.001-05:00

“There’s nothing like self-interest to motivate behavior. When people ask me what are ways to pick out tax-efficient [mutual] funds, the first thing I say is, ‘Find out whether the manager has his or her own taxable dollars in the fund.’”

- Susan Belder

Friday's Tax Quote - May 27, 2011

2011-05-27T12:00:00.000-05:00

“All taxes are a drag on economic growth. It’s only a question of degree.”

- Alan Greenspan

Friday's Tax Quote - May 20, 2011

2011-05-20T12:00:00.002-05:00

“Tax hatred is what holds the Republican Party together.”

- Bill Schneider

Friday's Tax Quote - May 13, 2011

2011-05-13T12:00:00.002-05:00

“…what are the inevitable consequences of being too fond of glory: Taxes upon every article which enters the mouth, or covers the back, or is placed under foot…taxes on everything on earth and the waters under the earth.”

- Sidney Smith

Friday's Tax Quote - May 6, 2011

2011-05-06T12:00:00.001-05:00

“Men in America were so conditioned that they felt differently about taxes and about prices. The former was an involuntary taking; the latter a voluntary giving….No one observed the obvious fact that in terms of total income of an individual it made no difference whether the money went for prices or taxes.”

- Thurman W. Arnold

Friday's Tax Quote - April 29, 2011

2011-04-29T12:00:00.000-05:00

“Censure is the tax a man pays to the public for being eminent.”

- Jonathan Swift

Friday's Tax Quote - April 15, 2011

2011-04-15T12:00:00.002-05:00

“The taxing authority is an uninvited party to all contracts.”

- Myron S. Scholes, Mark A. Wolfson, Merle M. Erickson, Edward L. Maydew, and Terry J. Shevlin

Friday's Tax Quote - April 8, 2011

2011-04-08T12:00:00.001-05:00

“[The federal income tax system is] a disgrace to the human race.”

- Jimmy Carter

Friday's Tax Quote - April 1, 2011

2011-04-01T12:00:00.001-05:00

“The math of the late 1980’s was simple. Any company that exchanged its equity for debt was immediately worth more, courtesy of the U.S. tax code. And every company was thought to be ripe for such a maneuver.”

- Roger Lowenstein

Friday's Tax Quote - March 25, 2011

2011-03-25T12:00:00.001-05:00

“Whoever hopes a faultless tax to see, hopes what ne’er was, is not, and ne’er shall be.”

- Alexander Pope

Friday's Tax Quote - March 18, 2011

2011-03-18T12:00:00.000-05:00

“Down to the Banana Republics
Down to the tropical sun
Go the expatriated Americans
Hopin’ to find some fun
Some of them go for the sailing
Brought by the lure of the sea
Tryin’ to find what is ailing
Living in the land of the free
Some of them are running to lovers
Leaving no forward address
Some of them are running tons of ganja
Some are running from the IRS.”

- Jimmy Buffet (“Banana Republics”)

Friday's Tax Quote - March 11, 2011

2011-03-11T12:00:00.001-06:00

“A fool and his money are soon parted. It takes creative tax laws for the rest.”

- Bob Thaves (“Frank & Ernest”)

Friday's Tax Quote - March 4, 2011

2011-03-04T12:00:00.001-06:00

“The best things in life are free, but sooner or later the government will find a way to tax them.”

- Anonymous

Kinder and Gentler IRS? Nope, Just Practical.

2011-02-27T17:17:00.000-06:00

For a while it was said that what emerged from the IRS Restructuring and Reform Act of 1998 was “a kinder and gentler” IRS. Over the past several years we have learned that the alleged tide of kindness was pulling back out to sea. Replacing it appears to be a more practical and resourceful IRS that is recognizing that traditional collection methods are resulting in a greater number of business failures and lower rates of repayment.

The IRS recently announced a “New Effort to Help Struggling Taxpayers Get a Fresh Start.” See News Release IR 2011-20 here. This is a good thing for a lot of taxpayers that have fallen behind on their tax obligations. Make no mistake, this is not a program that has grown out of altruism. The IRS must have realized that by lifting the threat of the sword and replacing it with a carrot, they could collect more unpaid taxes and allow the public a better solution to addressing tax problems.

The IRS announcement explains changes they are making. These include:

Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens.
Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.
Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement.
Creating easier access to Installment Agreements for more struggling small businesses.
Expanding a streamlined Offer in Compromise program to cover more taxpayers.

The IRS explains that the increased dollar threshold for lien filing is tied to inflationary changes since its last adjustment. They have not, however, released what those dollar thresholds will now be. The revisions to IRS procedure should expedite the release of a filed lien once a liability is fully paid.

The biggest change is the release of a lien where a taxpayer owing less than $25,000 enters into a direct debit Installment Agreement. In these cases, the monthly installment payment against a tax debt is automatically withdrawn from a taxpayer’s bank account. This means that people owing less than $25,000 might be able to avoid additional damage to their credit report resulting from a tax lien if they allow for an automatic withdrawal from their bank account. I am confident, however, that if a payment is missed (due to insufficient funds in a bank account) the IRS will be quick to file a lien against a taxpayer. Getting a lien removed after such a situation will likely require the full payment of the tax even where a direct debit is in place.

Small businesses owing $25,000 or less will also benefit under the new programs. The new rules should allow these businesses to enter into automatic installment agreements provided that the debts are paid off within 24 months. Obviously, this will require a monthly payment in excess of $1,000. So, while not a benefit to everyone, this will help a number of business get out of tax trouble without too much bureaucracy getting in the way.

Overall, these changes will allow a number of past due taxpayers to become fully compliant without adding a credit-devastating lien to their financial troubles. Setting cynicism aside, what the IRS is doing is a good thing.

Friday's Tax Quote - February 25, 2011

2011-02-25T12:00:00.000-06:00

“The government deficit is the difference between the amount of money the government spends and the amount it has the nerve to collect.”

- Sam Ewing

Emancipation Day: Why April 15, 2011 Falls on April 18th

2011-02-23T10:22:00.001-06:00

This year (2011), the April 15^th income tax filing deadline will not fall on April 15^th. Rather, because April 16^th is a legal holiday in the District of Columbia, it will periodically have nationwide income tax filing consequences. This year, Emancipation Day pushes the individual income tax filing deadline to Monday April 18^th. See IRS Notice 2011-17 here.

What is Emancipation Day? Every holiday has a reason behind it, however, too often we simply take pleasure in the fact that the existence of the holiday somehow positively affects us without thinking about the reason for the holiday. Emancipation Day celebrates the day in 1862 on which President Abraham Lincoln signed the Compensated Emancipation Act to free over 3,000 slaves in the District of Columbia.

Back to the tax impact: Because in 2011 the holiday falls on a Saturday, it is formally observed on the preceding Friday. The preceding Friday is April 15^th. When April 15^th falls on a holiday, the next day that is not a weekend or holiday becomes the individual income tax filing due date. In 2011, this is Monday April 18^th. As a result, all procrastinators will have that last weekend to take care of filing their returns.

You can find out more about Emancipation Day at the following links:

http://en.wikipedia.org/wiki/Emancipation_Day

http://www.timeanddate.com/holidays/us/emancipation-day

But the coolest link is here with images of the original act and transcriptions thereof: http://www.archives.gov/exhibits/featured_documents/dc_emancipation_act/

Happy President's Day!

2011-02-21T10:18:00.001-06:00

My good friends' young son had unfortunately thought that it was "Presents Day." I expect that he will not soon forget the lesson that this is the day on which we honor those who served our great nation as President.

Friday's Tax Quote - February 18, 2011

2011-02-18T12:00:00.001-06:00

“What is one really trying to do in the investment world? Not pay the least taxes, although that may be a factor to be considered in achieving the end. Means and end should not be confused, however, and the end is to come away with the largest after-tax rate of compound.

- Warren Buffett

Friday's Tax Quote - February 11, 2011

2011-02-11T12:00:00.001-06:00

“A citizen can hardly distinguish between a tax and a fine, except that the fine is generally much lighter.”

- G.K. Chesterton

Friday's Tax Quote - February 4, 2011

2011-02-04T12:00:00.001-06:00

“You must pay taxes. But there’s no law that says you gotta leave a tip.”

- Morgan Stanley (Advertisement)

A Word On Tax Collections

2011-01-31T11:20:00.005-06:00

In November and December of 2010, I wrote a series of tax articles for the State Bar of Wisconsin's Inside Track electronic news letter. The first concerned tax audits and can be read here. The second article discussed appeals and can be read here. The third addressed the United States Tax Court and can be read here.

The fourth article discussed (with great generality) what happens and what options may be available once the tax liability has become a fact that must be dealt with. A brief discussion on what options a taxpayer has for paying or negotiating a tax liability can be found here.

Friday's Tax Quote - January 28, 2011

2011-01-28T12:00:00.001-06:00

“Earth gets its price for what Earth gives us; The beggar is taxed for a corner to die in …”

- James Russell Lowell

A Word On The Tax Court

2011-01-24T11:00:00.002-06:00

Friday's Tax Quote - January 21, 2011

2011-01-21T12:00:00.001-06:00

“If a client asks in any but an extreme case whether, in your opinion, his sale will result in capital gain, your answer should probably be, ‘I don’t know, and no one else in town can tell you.’”

- James L. Wood

A Word On Tax Appeals

2011-01-17T10:41:00.001-06:00

Nearing the end of 2010, I began writing a series of tax articles for the State Bar of Wisconsin's Inside Track electronic news letter. The first concerned tax audits and can be read here. The second article discusses the practical and procedural aspects of an IRS tax appeal.

The discussion on appeals considers the different routes to the IRS Appeals Division and differences in how a case is viewed by appeals officers and the appeals division. The appeals article can be read here.

Friday's Tax Quote, January 14, 2011

2011-01-14T09:33:00.000-06:00

“The reward of energy, enterprise and thrift –is taxes.”

- William Feather

Choosing a Tax Return Preparer

2011-01-11T11:38:00.001-06:00

January heralds the arrival of tax season as Americans begin to receive their Forms W-2, 1099, K-1, etc. The fact that major tax reform promises to be a part of the Obama Administration's agenda reminds us that the tax laws and tax return preparation is as complicated as ever.

As a result, more and more people are turning to hired professionals to assist in the filing of their tax returns. But buyer beware, not all accountants and return preparers are created equal. Here are a few words of advice that the IRS has to offer:

Be cautious of tax preparers who claim they can obtain larger refunds than other preparers.
Avoid preparers who base their fee on a percentage of the refund.Use a reputable tax professional who signs the tax return and provides a copy.
Consider whether the individual or firm will be around to answer questions about the preparation of the tax return months, or even years, after the return has been filed.
Check the person’s credentials. Only attorneys, certified public accountants (CPAs) and enrolled agents can represent taxpayers before the IRS in all matters, including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.
Find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.

For more information on choosing a return preparer click here and watch the IRS video below.

Tax Law Forum's 3rd Birthday

2011-01-10T23:32:00.000-06:00

It has now been slightly more than three years that I have been writing about taxes on the Tax Law Forum blog. To grow with the times I have redesigned the web page (hope you like it), added an IRS Twitter feed and will give additional focus on current events.

I hope you stay tuned and enjoy what is to come in 2011.

Photo courtesy of Ed Sanders (”Ed g2s” på Wikimedia Commons), Creative Commons Attribution ShareAlike 2.5, Attribution ShareAlike 2.0 and Attribution ShareAlike 1.0 license

How Social Security Could Have Promoted Job Growth

2011-01-05T15:48:00.001-06:00

This month I am the "Alumni Guest Blogger" for the Marquette University Law School Faculty Blog. Its a pretty good blog even without my participation and I encourage you to check it out.

In my first guest post, I write about how the new tax legislation has chosen an indirect route to job growth through the Social Security Tax cut for employees. Giving the tax break to employers rather than employees could have done a lot more. Don't get me wrong, anyone who pays Social Security Tax will be happy to see the impact that the one year reduction in the tax will provide in their paychecks. However, if the new tax law is really supposed to be about job growth (as suggested by its title: Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010), it could have done more with the Social Security Tax cut.

To read about how the Social Security Tax cut really could have directly promoted job growth, read my post entitled: The Social Security Tax Cut And A More Direct Route To Job Growth.

While you are there, stick around to read more about what the school is up to (i.e. bringing on Russ Feingold as a visiting professor) and to consider interesting legal analysis.

HAPPY NEW YEAR!

2011-01-01T00:01:00.003-06:00

MERRY CHRISTMAS!

2010-12-25T00:01:00.002-06:00

What The Extended Tax Cuts Really Mean.

2010-12-24T08:42:00.001-06:00

Its hard to have missed the recent hustle and bustle in Washington about the the extension of the "Bush Tax Cuts." Many tax commentators have spent time explaining what the extension legislation says: what was extended, what wasn't included and the mitigated return of the estate tax.

But what does it really mean? I try to answer that in a recent article published in the Wisconsin Law Journal that can be found here. Enjoy.

2010 Tax Relief Act

2010-12-21T15:37:00.000-06:00

Even if John Q. Public doesn't find tax law all that interesting, he has to admit that it has been interesting enough over the past few years to keep two out of three branches of government talking about it half of the time.

Because of the developments, we tax types are all rather busy these days. That said, this is a tax law website and I want to share both analysis and commentary of what the new tax laws say.

For some analysis, visit the Komisar Brady & Co., LLP website for an article written by Mike Burzynski.

For commentary, come back to the Tax Law Forum.

Friday's Tax Quote - December 17, 2010

2010-12-17T08:39:00.000-06:00

“[P]eople don’t complain about taxes because they are selfish or stingy. They complain because they simply don’t believe they’re getting their money’s worth.”

- Zell Miller

Friday's Tax Quote - December 10, 2010

2010-12-10T10:38:00.001-06:00

“Introduce a wise and efficient system of taxation, and life and energy will pervade the country. Without such a system, it will sink into general and fatal paralysis.”

- The Atlantic Magazine

The IRS is following you...

2010-12-07T13:55:00.000-06:00

The IRS is following you...on Twitter that is. Today the IRS announced that you can get all the IRS news you want by following @IRSnews on Twitter. Tax professionals on Twitter may also want to follow @IRStaxpros.

This is certainly a good sign that the IRS is now trying to use social media tools to inform the taxpaying public of news and developments in the tax law. However, I have to wonder how any one of us Twitter users will feel when we receive the email notification telling us that "The IRS is now following you."

Friday's Tax Quote - December 3, 2010

2010-12-03T10:37:00.000-06:00

“A sales tax is a tax on the freedom of purchase.”

- Felix Frankfurter

Friday's Tax Quote - November 26, 2010

2010-11-26T10:33:00.001-06:00

“Moral turpitude is not a touchstone of taxability.”

- Frank Murphy

Friday's Tax Quote - November 19, 2010

2010-11-19T10:31:00.000-06:00

“Though tax records are generally looked upon as a nuisance, the day may come when historians will realize that tax records tell the real story behind civilized life. How people were taxed, who was taxed and what was taxed tell more about a society than anything else. Tax habits could be to civilization what sex habits are to personality. They are basic clues to the way a society behaves.”

- Charles Adams

Friday's Tax Quote - November 12, 2010

2010-11-12T10:29:00.000-06:00

“…For imposing Taxes on us without our Consent….”

- The Declaration of Independence

To Our Veterans - Thank You

2010-11-11T13:47:00.000-06:00

They went with songs to the battle, they were young.

Straight of limb, true of eyes, steady and aglow.

They were staunch to the end against odds uncounted,

They fell with their faces to the foe.

They shall grow not old, as we that are left grow old:

Age shall not weary them, nor the years condemn.

At the going down of the sun and in the morning,

We will remember them.

- Laurence Binyon

Friday's Tax Quote - November 5, 2010

2010-11-05T10:28:00.001-05:00

“The tax which will be paid for education is not more than the thousand part of what will be paid if we leave the people in ignorance.”

- Thomas Jefferson

A Word On Tax Audits

2010-11-03T23:15:00.000-05:00

Having recently spoken to a group of lawyers on what to do when their clients receive a letter from the IRS, I have begun writing a short series of articles on the same topic. Today, the the State Bar of Wisconsin published the first installment in its "Inside Track" electronic newsletter. The article can be found in full here.

Additional installments will cover tax appeals, court proceedings and the collection process. I will provide links to those articles as they are published.

A related video can be seen here:

Friday's Tax Quote - October 29, 2010

2010-10-29T10:25:00.000-05:00

“[Tax] liability is one of the notorious incidents of social life.”

- Oliver Wendell Holmes Jr.

Friday's Tax Quote - October 22, 2010

2010-10-22T10:24:00.000-05:00

“Those who can do a good trade don’t wrangle over taxes.”

- Old Chinese Proverb

Friday's Tax Quote - October 15, 2010

2010-10-15T10:23:00.000-05:00

“It was as true…as taxes is. And nothing’s truer – than them.”

- Charles Dickens

The IRS Must Now Write In English

2010-10-13T22:42:00.001-05:00

Well, not exactly. The IRS will continue to have Spanish counterparts to its regular forms. However, today President Obama signed into law the Plain Writing Act of 2010. This law requires that all federal agencies write their forms more clearly and in plain language that the intended audience can understand.

Is this law necessary? - Yes.

Should it be necessary? - No. Its a bit ridiculous that writing in plain "English" should have to be mandated by law. But sadly, in many instances, it is necessary.

The Iowa Politics website provided some examples of what these plain writing changes might look like when it announced the earlier passage of the bill in the House of Representatives. These examples can be found here. As an observation, the IRS appears to have seen the passage of the legislation coming as several of its forms began changing before the bill was singed into law.

USA Today reported the story here.

Friday's Tax Quote - October 8, 2010

2010-10-08T10:21:00.001-05:00

“The invention of the teenager was a mistake. Once you identify a period of life in which people get to stay out late but don’t have to pay taxes – naturally no one wants to live any other way.”

-Judith Martin

Warning – Your 501(c)(3) is about to lose its tax exemption

2010-10-07T14:42:00.000-05:00

This alarmist headline is something that should be shouted to thousands upon thousands of small tax-exempt organizations across the United States. Come October 15, 2010, many small tax-exempt organizations will automatically lose their federal tax exemption unless they fulfill certain filing requirements.

In the Pension Protection Act of 2006, it became mandatory that most tax-exempt organizations file an annual return or file an electronic notice. Failing to do so for three consecutive years automatically triggers a loss of exemption. October 15, 2010 marks the first three year final deadline for these organizations.

Small tax-exempt organizations (those with $25,000 or less in annual receipts) can solve this problem by visiting the IRS website (http://www.irs.gov/) and filing a Form 990-N. Doing so is relatively simple and can prevent a host of problems. Organizations that lose their tax exemption will have to reapply with the IRS to regain their tax-exempt status. If you have been through the application proces before, you know it can be a relatively arduous process. The loss of exemption and reapplication may also call into jeopoardy the charitable contribution deduction of an organization's donors.

The IRS has compiled a list of organizations that they believe to be at risk. That list can be found on the IRS website by clicking here.

Additional information concerning the potential loss of tax-exempt status and remedial filing requirements can be found here, here and here.

New Registration Requirements for Tax Return Preparers

2010-10-04T15:09:00.000-05:00

The Department of the Treasury has recently announced that its new registration system is up and running. The IRS will now require everyone that prepares “all or substantially all” of a tax return to register with the IRS and receive a Preparer Tax Identification Number (“PTIN”).

The requirement is part of a broad ethics reform that has taken place over the last 10 years amidst such accounting scandals as Enron and Worldcom. In 2005, the reforms amended the ethics rules governing tax practice before the IRS (known as Circular 230). The revisions to the ethics rules at that time principally affected the tax profession and the impact on most other people was that they now saw a “Circular 230 Disclosure” attached to any email from an accountant or tax lawyer. The new rules will again principally affect the tax profession but the impact could be much broader.

The new rules require that anyone that is paid for preparing "all or substantially all" of a tax return must register for a PTIN. The requirement that any tax return preparer register and obtain a PTIN may catch a large group by surprise including:

• Staff accountants working for accounting firms who prepare returns but do not sign or have ultimate responsibility for what the returns say.

• Paralegals working for attorneys that have as a part of their job requirements the preparation of tax returns.

• Interns or seasonal employees hired by accountants to help complete tax returns before the April 15th due dates.

• The friendly neighbor that prepares your tax return for a few dollars.

Understandably the accounting profession is somewhat troubled by these requirements. It is their position that only those accountants that sign the tax returns (and thereby take responsibility for what the return says) should have to register. A rule that only required signing preparers to register would appear to achieve the IRS’ goal of encouraging ethical return preparation. So far, however, the government has refused to modify the rule.

There is an economic component to this registration requirement as well. The annual fee for registering is $64.25. Of this amount $50 will go to the IRS for technology, compliance and outreach. With an estimated 600,000 registering this will result in an astounding $30,000,000 outreach program.

Even more controversial is whether these staff accountants, paralegals, etc. will be subject to the competency testing and continuing education requirements on which the IRS is busily drafting rules. We’ll have to stay tuned to see exactly how this part ends up playing out.

Registration and additional information is available online at www.irs.gov/taxpros.

Friday's Tax Quote - October 1, 2010

2010-10-01T10:19:00.000-05:00

“Work and earn; pay taxes and die.”

- Old German Proverb

Friday's Tax Quote - September 24, 2010

2010-09-24T10:17:00.000-05:00

“More Americans pay taxes than vote.”

- J. Robert Kerrey

Friday's Tax Quote - September 17, 2010

2010-09-17T10:15:00.001-05:00

“Don’t tax you, don’t tax me;
Tax the fellow behind the tree.”

- Russell B. Long

Friday's Tax Quote - September 10, 2010

2010-09-10T10:14:00.001-05:00

“Man is not like other animals in the ways that are really significant; animals have instincts, we have taxes.”

- Erving Goffman

Friday's Tax Quote - September 3, 2010

2010-09-03T10:12:00.000-05:00

“I’m squared up with the USA.
You see those bombers in the sky.
Rockefeller helped to build them.
So did I.
I paid my income tax today.”

- Irving Berlin

Friday's Tax Quote - August 27, 2010

2010-08-27T10:11:00.000-05:00

“If the Nation is living within its income, its credit is good. If, in some crises, it lives beyond its income for a year or two, it can usually borrow temporarily at reasonable rates. But if, like a spendthrift, it throws discretion to the winds, and is willing to make no sacrifice at all in spending; if it extends its taxing to the limit of the people’s power to pay and continued to pile up deficits, then it is on the road to bankruptcy.”

- Franklin D. Roosevelt

Friday's Tax Quote - August 20, 2010

2010-08-20T10:03:00.001-05:00

Celebrities are Taxpayers Too!

2010-08-19T23:36:00.000-05:00

Add Naomi Campbell to the list of celebrities with notable tax concerns. The IRS has recently filed a tax lien against her for roughly $63,000.

Read about it here, or here, or here. However, there isn't really a whole lot to the story. Nor is this really a salacious tale of tax troubles. At least not of the sorts that we have seen from other celebrities. A lien was filed and her accountant says it was a mistake because he has never heard about it. I expect that this will be sorted out by first determining if it is a legitimate tax liability or some sort of mistake. If legit, the tax will probably get paid and the lien will be lifted.

Other celebrities that have had tax troubles include:

Ace Frehley
MC Hammer
Robin Givens
Forest Whitaker
Chris Tucker
Val Kilmer
Patti LaBelle
Randy Quaid
Method Man
Nicolas Cage
Helio Castroneves
Heidi Fleiss
Richard Hatch
Willie Nelson
Wesley Snipes
Janine Lindemulder
Pete Rose
O.J. Simpson

Frankly the one that bothers me the most is Ace Frehley. I loved KISS growing up and hate to see a childhood idol end up with tax problems.

For more on these celebrities the details surrounding their tax troubles check out the slide show here.

Friday's Tax Quote - August 13, 2010

2010-08-13T10:02:00.000-05:00

“Has [the tyrant] not also another object which is that [the people] may be impoverished by the payment of taxes, and thus compelled to devote themselves to their daily wants and therefore less likely to conspire against him?”

- Plato

Friday's Tax Quote - August 6, 2010

2010-08-06T10:00:00.001-05:00

“Taxation is eminently practical, and is in fact brought to every man’s door.”

- Rufus W. Peckham

THE IRS IS NOT JUST ABOUT TAXES

2010-07-31T13:18:00.001-05:00

The recent National Taxpayer Advocate’s mid-year report observes that the IRS has, over the past several years, developed into a dual role agency. The report identifies that the IRS’ roles are now:

1. To encourage tax compliance and

2. To deliver social benefits and programs.

Most taxpayers are familiar with the IRS role of ensuring the filing of tax returns, the auditing of those returns and the collection of tax due. The Taxpayer Advocate report also appropriately identifies that the IRS resources are largely being diverted by the administration of social programs such as:

 Administering billions of dollars to millions of taxpayers in economic stimulus payments.

 Making work pay credits.

 First time home buyer credits.

 Hybrid car credits.

Without regard to the politics of these credits and social programs, there is a certain sense of logic to having the IRS administer these kinds of programs. The IRS has an existing infrastructure for managing and tracking the credits and payments. However, the significant observation by the Taxpayer Advocate is that the dual role of the IRS as it has evolved should receive a formalized acknowledgement in order to allow it to operate effectively.

Only by acknowledging the dual role of the IRS is it likely that additional resources will be provided to the IRS. This is necessary due to the substantial diversion of IRS resources to activities other than ensuring tax compliance. While the role of the IRS has increased, the resources allocated to it have not increased correspondingly. This is bad.

While it may be perceived as a bit counterintuitive that a tax attorney who is regularly engaged in disputes with the IRS would suggest that the IRS requires additional funding, this is exactly what the organization needs. Without adequate funds and staff, the IRS cannot function properly.

The Taxpayer Advocate’s report observes that the IRS is failing to consider all programs in place for resolving existing tax issues. This is largely due to the workload currently burying the IRS. Given the resources the agency has, its employees simply cannot be bothered to consider each taxpayer’s situation to find the best resolution. As a result, it holds fast to the “one-size fits all” approach to the majority of tax disputes.

Perhaps by accepting the social role that the IRS has grown into could lead to additional and adequate funding to prevent the current resources of the tax authority from being further overwhelmed. I withhold my opinion as to whether it is appropriate for the IRS to administer social programs in addition to ensuring tax compliance. However, I note that if the IRS is to serve multiple purposes, it should be funded and staffed to a level at which it can in fact serve the dual role.

Friday's Tax Quote - July 30, 2010

2010-07-30T09:58:00.000-05:00

“Death and taxes may be inevitable, but they shouldn’t be related.”
- J.C. Watts Jr.

THE TAXPAYER ADVOCATE SAYS THAT THE IRS IS UNDERMINING TAX COMPLIANCE

2010-07-29T13:17:00.000-05:00

The office of the National Taxpayer Advocate, an independent government watchdog over the Internal Revenue Service, has issued its 2010 mid-year report evaluating the Internal Revenue Service’s practices. The overall theme of this report (as in prior reports) is that the IRS’s collection practices are in grave need of overhaul.

Some of the highlights of the report include the following comments concerning the particularly onerous collection practices of the IRS:

It is increasingly difficult for taxpayers whose circumstances do not fit into checklist parameters to find someone able to address their problems.

The IRS is failing to address the needs of taxpayers who are experiencing economic difficulties and has not revised collection policies that harm taxpayers, thereby undermining its goal of increasing voluntary compliance.

The IRS has failed to utilize the significant collection alternatives available to it to resolve taxpayer debts, thus, leading to increasing accounts receivable on the IRS books, while taxpayers face staggering accruals of penalties and interest that impact their future compliance.

There is a general and extremely unfortunate perception in parts of the IRS that taxpayers who fall behind on their tax payments are “bad” taxpayers who deserve what they get.

What do these comments mean? They mean that the National Taxpayer Advocate, charged with oversight of the IRS, has observed the same thing that taxpayers across the country have experienced first hand.

What else does this mean? Probably very little. The onerous collection practices of the IRS and the failure to adequately consider collection alternatives based on a taxpayer’s circumstances, is something that has been reported in several of the reports. Until we see corrective action by the IRS or mandated by Congress, we have to consider that the tax authority will conduct “business as usual.” We should expect the IRS will do so in spite of these observations by the Taxpayer Advocate. This will likely result in additional unpaid taxes and greater non-compliance by the American public.

Friday's Tax Quote - July 23, 2010

2010-07-23T09:57:00.000-05:00

“Blessed are the young, for they shall inherit the national debt."

- Herbert Hoover

Friday's Tax Quote - July 16, 2010

2010-07-16T09:55:00.000-05:00

“We are told that this is an odious and unpopular tax. I never knew a tax that was not odious and unpopular with the people who paid it.”

- John Sherman

Friday's Tax Quote - July 9, 2010

2010-07-09T09:54:00.000-05:00

“I don’t know if I can live on my income or not – the government won’t let me try it.”

- Bob Thaves (‘Frank & Ernest’)

Friday's Tax Quote - July 2, 2010

2010-07-02T09:52:00.000-05:00

“Capital punishment: The Income Tax."

- Jeff Hayes