Category: Tax

These New IRS Competency Exams Are Going To Be a Hoot

Our resident tax nerd, Joe Kristan, touched on the IRS competency exam a couple of weeks ago but yesterday the IRS officially rolled out the red carpet. So, if you prepare tax returns but aren’t a CPA, lawyer, or enrolled agent, you now have the distinct pleasure of spending $116 to spend a few hours with everyone’s favorite test vendor – Prometric – whose proctors will keep a watchful eye on you to make sure your ostomy bag isn’t a secret answer bank, that you aren’t packing heat and your gum is appropriately disposed of. What’s the point of all this, you ask? IRS Commish Doug Shulman can answer that:

“This is another major step forward in our effort to enhance tax preparation service to millions of taxpayers. People should feel assured that the person they hire to prepare their federal tax returns has a working knowledge of the tax code,” said Doug Shulman, IRS Commissioner. “The majority of tax return preparers are reputable professionals but the few bad apples cause great harm to taxpayers and the industry.”

Got it? It’s for the good of the country. Just make sure you don’t have a runny nose on the day of your test. That’ll get you in trouble.

[via IRS via NYSSCPA]

Steel Cage Death Tax Match: David Cay Johnston vs. Grover Norquist

Yesterday we called attention to the 60 Minutes interview of tax hatchetman Grover Norquist. Norquist haters nationwide were no doubt gritting their teeth while GGN yukked it up with Steve Kroft and spread the gospel of the Taxpayer Protection Pledge (aka “THE PLEDGE”). This may have inspired today’s column by the Godfather of Tax Journalists, David Cay Johnston. It explains first, how the utter failure of the Congressional Supercommittee actually will result in tax increases:

[B]arring a mad scramble to pass new laws in the next six weeks, workers will pay around $110 billion more in payroll taxes next year and they will not get a $55 billion tax cut proposed two months ago by President Barack Obama. Absent another last-minute fix, more than 22 million families will be required to pay higher income taxes due to the Alternative Minimum Tax, some only because a parent or child has cancer or some other costly medical need.

DCJ is of the opinion that these tax increases would violate THE PLEDGE and thus, should put every signer of THE PLEDGE directly in the tax assassin’s crosshairs. In short, THE PLEDGE is bullshit, says DCJ and its signers should really thinking about another pledge they took and act accordingly:

Pledge signers cannot serve two masters, Norquist and the Constitution. Politicians who do not renounce their pledge of allegiance to Norquist do not deserve to hold office as it prevents them from doing whatever is in the country’s best interests.

You have a choice to make, GOP lawmakers. This plea comes from another bearded man, so it should be taken just as serious.

GOP inaction means higher taxes [DCJ/Reuters]

Grover Norquist Denies Having Republican Congressional Members By Their Pubes

Republican Party HMFIC Grover Norquist was on 60 Minutes last night and Steve Kroft did his best to pull one over on him but as you might expect, GGN took all the questions like the K 12th Street gangsta that he is.


Lots of great moments to note. Some of my personal favorites:

1. Bob Dole’s face at ~1:30.

2. Newt Gingrich’s horrendous handwriting

3. Rat heads in the Coke bottle are quite a stunning image.

4. Two words: Grover, Babe

5. Let’s be real here: The President of Americans for Tax Reform doesn’t take the metro.

And Jesus, is Alan Simpson a grumpy old coot or what? Other observations are welcome at this time.

General Electric Managed to Keep Their Tax Return Under 60,000 Pages

Recently, Congressman Paul Ryan (R-WI) was chattin’ up some citizens at a townhall meeting where he told a little anecdote about asking a GE “tax officer” how long the company’s tax return was for this year. He was told (and the Weekly Standard confirmed) that it was in the nabe of 57,000 pages. Granted, GE filed their return electronically, so there’s no way we can officially know what the count is but the combination of the world’s best tax law firm and a grip of savvy loaned KPMG employees managed to keep it under 60k. Nice job, everyone. [TWS via TaxProf]

Don’t Look Now But There Is Glimmer of Sensible Tax Policy in Congress

A long-overdue measure to limit state taxation of non-residents has cleared its first committee, reports the Tax Policy Blog. The House Judiciary Committee approved H.R. 1864, the Mobile Workforce State Income Tax Simplification Act, which provides:

An employee’s wages or other remuneration shall be subject to state income tax only in either:

-the employee’s state of residence, or

-a state where the employee is present and performing employment duties for more than 30 days during the calendar year. A day counts if the employee performs more employment duties in that state than in any other state during that day. Travel time does not count.

For traveling taxpayers, that’s good news. Lord knows how many loyal Going Concern readers flit from state to state in their unceasing efforts to ensure that the Nation’s financial statements are fairly stated in all material respects. But it’s also bad news — it reminds us that right now you can be taxable in a state after spending as little as a day there.


Why are the states so greedy? Think of LeBron James. When he visits the Staples Center to beat up the Clippers, the home team may lose, but the Franchise Tax Board wins every time. But the tax law in its majesty applies as much to the newbie auditor sent to count vegetables as to LeBron.

Fortunately for our auditor, the firm will probably tell her how much of her income is taxable in each state. Unfortunately, it won’t do all of the extra tax returns she will have to file in all of the exciting states a modern jet-setting auditor may visit.

H.R. 1864 is a long way from perfect. Its biggest flaw is that it doesn’t protect visiting entertainers or athletes. Sure, LeBron can afford the tax help to file in a couple dozen states, but the same rules apply to minor league ballplayers, comedians trying to become senators, and your friendly struggling road band. Still, anything that helps abused staff accountants isn’t all bad.

The proposal is a long ways from becoming law. The high tax states hate any limitations on their ability to pick visitor pockets. Still, it’s nice to have at least a glimmer of hope for sanity.

IRS Commissioner Doug Shulman Puts Tax Preparers’ Job Security Concerns to Rest

“Perhaps the most telling indicator of taxpayer confusion over the code’s complexity is that today, 90% of individual taxpayers pay for professional tax preparation or tax software to prepare their tax returns. IRS research estimates that, over the past 10 years, the burden for the typical taxpayer has increased by about 20% and would likely be even more if they had to prepare returns themselves without any aids or tools. Moreover, we estimate individual taxpayers and businesses spend more than 7 [billion] hours each year complying with filing requirements.” [Tax-News via Tax Foundation]

Grover Norquist Did His Best to Educate the Patriotic Millionaires on How to Pay Their Fair Share of Taxes

Not everyone agrees with tax hit man Grover Norquist’s ideas. While GGN would like nothing better than to see every federal and state levy banished to the darkness, there are a number of people who don’t share this view. A certain group of these people are from the more affluent corners of society and they’ve organized themselves as the “Patriotic Millionaires” in order to make the case that they are sick and tired of being able to afford competent CPAs to legally reduce their tax burden to an unfair amount. Grover, being the big softie that he is, realizes (not from personal experience, mind you) that the burden of not paying your fair of taxes is a heavy one. And because he’s upstanding patriot himself, he went to the Hill yesterday to meet with these troubled folks to help alleviate their pain:

“If you think the federal government can spend your money better than you can, then by all means” pay more in taxes than you owe, said Grover Norquist, of Americans for Tax Reform, a group that has gotten almost all congressional Republicans to pledge to vote against tax hikes. The IRS should have a little line on the form where people can donate money to the government, he suggested, “just like the tip line on a restaurant receipt.”

Tipping! Millionaires know how to do that, don’t they? I mean with all the servants and eating at fancy restaurants and whatnot, this should be an easy way for the wealthy to ease their low tax guilt. But despite all his suggestions and support, some did not receive the message all too well:

One of the millionaires suggested that if Norquist wanted low taxes and less government, “Renounce your American citizenship and move to Somalia where they don’t collect any tax.”

Well! If that’s the thanks Grover gets, don’t expect him to be so forthcoming with the advice next time.

With supercommittee silent, millionaires and others eagerly jump in with their own advice [WaPo]

Memo to Anyone Under the Impression That There Is Some Secret Backdoor Escape Hatch in the Taxpayer Protection Pledge That Says a Hike in the Capital Gains Tax Is Allowed: There Isn’t One

Because a whole slew of people out there seem to have severe memory loss and there are rumors that the not-so-Supercommittee is kicking around a hike in the capital gains tax, Americans for Tax Reform will go over this ONE. MORE. TIME.

The Congressional “Super Committee” is now in its final week of deliberations. Rumors are constantly swirling around Washington about what they are talking about. One rumor we have heard is that the Super Committee might consider hiking the capital gains tax rate paid by a wide range of investment partnerships, including partners and employees at private equity, venture capital and real estate firms. The Taxpayer Protection Pledge commits signers to “oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses.” This clearly precludes any hike in the capital gains tax rate.

Does Grover Norquist have to slap you people?

Any Capital Gains Rate Hike Violates Tax Pledge [ATR]

Wanted: North Dakota Tax Professionals Who Don’t Mind Stilettos And G-Strings

A tipster clues us in to the wild world of one small oil boomtown in North Dakota that’s going to need some pretty open-minded tax pros in town if things keep up:

CNNMoney:

Forget Vegas. Strippers are discovering they can make ten times as much dancing in the oil boomtown of Williston, N.D.

Thousands of men have come here seeking high-paying jobs working for the oil companies. And, at the end of the day (or four or five days when they’re working on a rig), many of them are looking for some female companionship at one of the town’s two strip club’s [sic], Whispers or Heartbreakers.

Word has gotten out about just how much money can be made dancing in Williston’s strip clubs. The money is phenomenal, but the competition is stiff.

Whispers has received applications from exotic dancers in Hawaii, Alaska, even the Czech Republic and Germany, said Melissa Slapnicka, the co-owner of the club. She’s been bombarded with so many applications that she only gives each dancer a week to try out. If they don’t work out, they don’t come back, she said.

According to the article, one 36-year-old stripper (uhh…) who has traveled to Williston for dancing work over the last few years now finds herself making $2000 – $3000 in a single night. I don’t expect you guys to know this but that’s a lot of money for a stripper to make in a single evening.

Even on a slow night, Slapnicka says her girls are bringing home $1500.

Assuming her girls are 1099 employees, looks like there might be an opening for a qualified tax professional willing to help these successful strippers ensure their tax house is in order. Especially now that they’ve been featured in a major media outlet, you can rest assured the Shulman Army has been dispatched to keep an eye on their gains.

Paging The Tax Domme!

Now Non-CPAs Can Taste the CPA Exam Experience!

The IRS Commissioner and his subaltern for preparer regulation this week spilled some of the beans about the “competency tests” that they are imposing on the unwashed (non-CPA, non-lawyer, non-enrolled agent) preparers. Some key bits, as reported by Tax Analysts (sorry, subscriber-only link):


This confirms the obvious: the competency test will be a joke. It has to be, or too few preparers would survive to prepare the nation’s returns. It won’t be completely open-book, but it sounds like you will be able to pass if you have adequate skills at reading and using an index.
This all makes it look like the cynics are right – it’s all about extending IRS power over preparers.

Don’t believe me? Listen to Shulman’s own words:

Today, I want to talk for a little bit about some of our priority programs, such as the Return Preparer Program, the evolution of our relationship with our largest corporate taxpayers, including Schedule UTP, and our work on what we’re calling a real time tax system.

The common thread that runs through them is points of leverage and working smarter.

Points of leverage sounds like what a wrestler uses to pin an opponent. The IRS can use these “points of leverage” to make preparers more subjects of the government and less advocates for their clients. And in their own sweet time, they will.

IRS to Allow Deduction of Medical Expenses for Those Diagnosed with Gender Identity Disorder

When nature makes a mistake, it can be expensive to repair. Rhiannon O’Donnabhain long suspected that nature had mistakenly assigned him to the wrong team, and after growing up male, fathering three children, and getting divorced, looked into fixing that. A diagnosis of Gender Identity Disorder (GID) was reached, and the process began.


There was a lot involved. The Tax Court says the process included:

– 20 weekly individual therapy sessions.
– Hormone therapy
– facial surgery
– genital surgical sex reassignment
– breast augmentation surgery

This process continued under the watchful (but not free) observation of a therapist.

Now female, O’Donnabhain deducted $21,741 in medical expenses related to the reassignment on her 2001 return. The IRS objected, but the Tax Court upheld her medical deductions for all but the breast augmentation (they said that was cosmetic, not medical).

The expert testimony also establishes that given (1) the risks, pain, and extensive rehabilitation associated with sex reassignment surgery, (2) the stigma encountered by persons who change their gender role and appearance in society, and (3) the expert-backed but commonsense point that the desire of a genetic male to have his genitals removed requires an explanation beyond mere dissatisfaction with appearance (such as GID or psychosis), petitioner would not have undergone hormone therapy and sex reassignment surgery except in an effort to alleviate the distress and suffering attendant to GID. Respondent’s contention that petitioner undertook the surgery and hormone treatments to improve appearance is at best a superficial characterization of the circumstances that is thoroughly rebutted by the medical evidence.

Now the IRS has changed its mind. In an Action on Decision published yesterday the IRS said that they will follow the Tax Court’s decision and will allow gender reassignment costs as a medical deduction for diagnosed GID.

Unfortunately, there still is no known medical fix for Accountants Personality Disorder. Medicine remains helpless to treat the many rock stars trapped in CPA personalities.

This Tax Reform Stuff Can Wait

[I]f we are going to make real progress, we can’t fixate on every overhyped, half-baked tax slogan that comes along. Sooner or later we must get back to basics. Here’s the main question: Should taxes be cut, raised, or reformed without changing overall revenue? The answer is that taxes should be cut in the short term, raised after we are clearly out of our cyclical downturn, and then reformed only after we have settled on the magnitude of tax increases needed for deficit reduction. [Martin Sullivan]