Category: Tax

Ja Rule Wouldn’t Be in This Mess If He Had a Decent Accountant

Let’s be honest though, “decent” is probably pushing it. A “below average” accountant could have slapped some numbers on a 1040 and hit the button.

Ja got twenty-eight months for failing to file income tax returns and claims that “[I]n no way attempted to deceive the government or do anything illegal,” he said. “I didn’t know how to deal with these finances, and I didn’t have people to guide me, so I made mistakes.” Anyone near Oneida that’s looking for a new client should feel free to drop by the correctional facility to make a pitch. [HP]

Who Is Bizarro Grover Norquist?

If you’ve been keeping up with things, you’ve noticed that Americans for Tax Reform founder and president Grover Norquist is everywhere. He’s like some sort of omnipresent Swedish tax assassin superhero (it helps having an active blog and Twittertter.com/#!/GroverNorquist”>accounts).

He’s getting Presidential candidates to sign his Taxpayer Protection Pledge; he’s preparing for inevitable destruction of our nation’s capital; he’s going on the Colbert Report to make grandmothers everywhere shake in their orthopedic shoes.

This PR assault has resulted in a flurry of blog posts from us (okay, just me) on GN’s wily ways, mostly because we admire said wiliness, political tenacity and overt sarcasm and sass. However, a question has now been asked by Joseph Thorndike that we had not previously considered Who is the anti-Grover Norquist? That is, who is the progressive stalwart on tax policy? Presumably someone who would argue that we need to always raise taxes in every instance possible and any time taxes are cut, a corresponding elimination of tax expenditures would occur. Okay, maybe I’m being a tad literal. Anyway, Thorndike gives it a shot:

During the NPR interview, I was asked if I could think of a left-leaning counterpart to Norquist. I was stumped. A bunch of people came to mind, notably Bob McIntyre at Citizens for Tax Justice and Bob Greenstein at the Center for Budget and Policy Priorities. But neither seemed to fit the bill very well. Sure, McIntyre and Greenstein have been important and highly influential voices for progressive tax policy. But neither has reshaped political debate in Norquistian fashion.

In my opinion this is an futile exercise since the bizarro version of the Taxpayer Protection Pledge would be the political equivalent of guzzling arsenic. Americans don’t like taxes, so there’s virtually nothing to be gained by taking the 180 degree positions of Norquist (again, in their purest form). Similarly, the organization “Americans for Tax Reform” sounds quite sensible. An organization named “Americans for Keeping This God-awful Fuckshow of a Tax System the Way It Is” on the other hand, is less attractive.

Thorndike then posits that guys like McIntyre and Greenstein are “entirely too knowledgeable when it comes to tax policy to ever be compared to Norquist.” Fine. So Grover isn’t as tax wonky as those other guys. Policy wonks typically don’t make good political tacticians and certainly don’t make for good politicians. Wonks look at actual numbers, facts and statistics to make conclusions. Lots of politicians struggle with English. Norquist is acutely aware of this and relies on speaking to them in terms they can understand, such as, “You raise taxes and I’ll end your political career.” Politicians can understand that. They cannot understand Howard Gleckman.

So bizarro Grover Norquist, if you’re out there, please make yourself known. Every (super)man needs a nemesis.

Not Grover: Who’s the Progressive Counterpart to Norquist? [Joseph Thorndike]

DOJ Curious to Know if Credit Suisse Pulled a UBS

That is, helped American clients stash money offshore.

Credit Suisse said Friday it had been notified that it was the object of an investigation by the United States Department of Justice, citing “a broader industry inquiry.” The Swiss bank said that it had previously received subpoenas and other information requests from the Justice Department and other government agencies regarding cross-border services that its private banking arm provided to American clients.

As you may recall, the situation for UBS didn’t turn out so well and they sorta went back on that whole “secrecy” thing. Unfortch for Credit Suisse, they’ll probably have to snitch too:

On Friday, a court in Lausanne upheld the Swiss government decision to force UBS to hand over client data, citing “virtually uncontrollable economic repercussions for Switzerland” if it had not done so. That decision implies that Credit Suisse, too, may be ordered to surrender information about customers’ accounts to American authorities.

Credit Suisse Discloses U.S. Inquiry Into Private Banking [DealBook]
Earlier: DOJ: You Bet Your A$$ We’re Going After More Offshore Tax Evaders

When It Rains, It Pours: R. Kelly Hit with Tax Lien

If you’ve been poking around the web the last couple of days, you probably heard that R&B singer R. Kelly is in danger of getting thrown out of his house. It’s an unfortunate turn of events for RK who stopped paying his mortgage payments trying to strongarm JP Morgan into modifying his loan.

Unfortunately for R., it appears he also has blown off the IRS. Delinquent celebrity taxpayer scoop artist Robert Snell reports:

Music industry bad boy R. Kelly has more than foreclosure to worry about. Kelly, the controversial R&B star owes more than $837,000 in delinquent federal taxes, records show.

Snell reports that the IRS released a $1 million lien just last month against RK, so it’s unclear if this little oversight is the result of his JPM negotiating strategy or he’s still getting caught up on things.

R. Kelly believes he can fly — from tax bill [Tax Watchdog]

Grover Norquist Is Adequately Prepared for Anyone Who Might Try to Burn Washington, D.C. to the Ground

In case you haven’t been paying attention, GOP Taskmaster Grover Norquist takes his Taxpayer Protection Pledge very seriously. So serious in fact that not even a conservative stalwart like Tom Coburn has come under repeated attacks from Norquist and Americans for Tax Reform. So serious that not even our grandmothers’ lives will be spared were terrorists to demand that we raise taxes 1% on the highest earners.

Norquist’s steadfastness has managed to get under a lot of people’s skin including people who thinks he’s a little cuckoo, Democrats and even some guy at Deloitte.

This, understandably, has made Norquist a little paranoid. If someone were able to infiltrate ATR HQ with an army of ninjas, collect all the signed pledges and throw them into an incinerator, how could he continue holding the entire Republican party by their flag-wrapped testes? There would be no tangible proof that these sacred documents were, in fact, signed in front of two witnesses (as is required). Worry not, fiscally frugal readers, Grover is far too smart for that. As the Washington Post reports, GN has taken the necessary precautions to avoid such a catastrophe:

“I keep the originals in a [secret] vault, in case D.C. burns down,” said Norquist, referring to the pledge that his organization asks politicians to sign, vowing to “oppose any and all efforts” to raise taxes. “When someone takes the pledge, you don’t want it tampered with; you don’t want it destroyed.”

So bring your sissy Democrat political operatives, your ink bombs, your pledge-sniffing dogs. You’ll have to do nothing less than sic Jack Bauer on Grover if you want to get your mitts on those pledges. And even if you do, don’t think your grandmother won’t pay the price.

Grover Norquist, the anti-tax enforcer behind the scenes of the debt debate [WaPo]

(UPDATE 2) News Corp. Appears to Be a Big Fan of Offshore Tax Havens

Sure, GE may have the “best tax law firm” in house but the boys and girls working for Rupes seem to have a few tricks of their own. David Cay Johnston reports:

News Corp. has 152 subsidiaries in tax havens, including 62 in the British Virgin Islands and 33 in the Caymans. Among the hundred largest U.S. companies, only Citigroup and Morgan Stanley have more tax haven subsidiaries than News Corp., a 2009 U.S. Government Accountability Office study found.

News Corp. had nearly $7 billion permanently invested offshore in 2009, money on which it does not have to pay taxes unless it brings the money back to the United States. Meanwhile, it can use that money as collateral for loans in the United States, where interest paid is a tax-deductible expense.

This and other tax planning strategies result in a 20% tax rate for the company. And not a single phone hacked!

[via Reuters]

UPDATE:
Via NPR’s The Two Way news blog, Reuters has posted this statement:

Please be advised that the David Cay Johnston column published on Tuesday stating that Rupert Murdoch’s U.S.-based News Corp made money on income taxes is wrong and has been withdrawn. News Corp’s filings show the company changed reporting conventions in its 2007 annual report when it reversed the way it showed positive and negative numbers. A new column correcting and explaining the error in more detail will be issued shortly.

As of now, Johnston’s post remains unchanged and what I blockquoted above doesn’t seem to be in dispute but the situation appears to be fluid.

UPDATE 2:
Here’s a portion from Johnston’s new column:

Readers, I apologize. The premise of my debut column for Reuters, on News Corp’s taxes, was wrong, 100 percent dead wrong.

Rupert Murdoch’s News Corp did not get a $4.8 billion tax refund for the past four years, as I reported. Instead, it paid that much in cash for corporate income taxes for the years 2007 through 2010 while earning pre-tax profits of $10.4 billion.

For the first time in my 45-year-old career I am writing a skinback. That is what journalists call a retraction of the premise of a piece, as in peeling back your skin and feeling the pain. I will do all I can to make sure everyone who has read or heard secondary reports based on my column also learns the facts and would appreciate the help of readers in that cause.

Johnston goes on to explain in detail how the error occurred. He also states that a number of the facts originally reported, including the number of News Corp. subsidiaries in tax haven (that we blockquoted above), remain.

Everyone Is Going to Have to Accept the Fact That the Guy Who Caught Derek Jeter’s 3,000th Hit Is Going to Pay Some Taxes

As you may have heard, Derek Jeter hit a home run for his 3,000th hit on Saturday and it has resulted in fanfare that usually follows noteworthy accomplishments by media darling sports superheroes-cum-ladykillers.

What also has become news is tught the baseball. Sure Christian Lopez has over a hundred grand in school debt but since he’s a stand-up guy, he gave the ball to DJ because “it rightfully belonged to Jeter.” Also, if Lopez had kept it, everyone in the Bronx would have hunted him down like Osama bin Laden.

Anyhoo, after catching the ball, Lopez was whisked away by security to meet with Yankee President Randy Levine, who said, “What do you want?” Answer:

[T]he Yankees gave Mr. Lopez four Champions Suite tickets for their remaining home games and any postseason games, along with three bats, three balls and two jerseys, all signed by Jeter. For Sunday’s game the team gave him four front-row Legends seats, which sell for up to $1,358.90 each.

The Times rang up Paul Caron who reminded everyone that when Oprah gave her audience cars back in ’04, they all incurred taxes and Lopez would be no different. The Times then breaks down the value of the loot:

On SportsMemorabilia.com, an auction site, baseballs signed by Jeter were being sold for up to $600, jerseys for close to $1,000 and bats for $900.

The tickets to the 32 remaining home games (after Sunday) have a combined face value of $44,800 to $73,600, according to the team’s Web site. The tickets could be worth a lot more if the Yankees play deep into October. Steven Bandini, a tax partner at the accounting firm Zapken & Loeb, said that if the items were valued modestly at $50,000, they would probably carry a tax burden of about $14,000.

Elie Mystal, editor of our old sister site Above the Law wrote me, “[Taxing the memorabilia/tickets] [is] the kind of thing that makes people hate the Government.” Elie’s statement struck me as odd for a couple of reasons: 1) He is unabashed Mets fan and I would expect him to wish nothing but bad luck on Jeter, Lopez and the entire Yankee organization after this overt jerking off by media; 2) He is also an unabashed liberal which means that he should love the government and by virtue, love taxes. Not because taxes are lovable like puppies or grandmothers but because they build roads, fund public schools and go to pay salaries for government employees (that includes lawyers, accountants, engineers and whole bunch of people that aren’t IRS agents).

The items have value. Sorta like cash. Cash that is deposited into your bank account when your employer pays you for performing average work at your job. That cash gets there only after your employer has withheld taxes from your paycheck. Lopez was handed these tickets and memorabilia on a pinstriped platter. FREE. OF. TAX. By all accounts, he doesn’t have the income to purchase those items. If he did, he would have already paid taxes on that income. Simple.

Of course some (who are obviously unapologetically biased) might argue that these items were gifts and not taxable:

“The legal question of whether it is a gift or prize is whether the transferor is giving the property out of detached and disinterested generosity,” [Columbia Law] Professor Graetz said. “It’s hard for me, not being a Yankee fan, to think of the Yankees as being in the business of exercising generosity to others, but there’s a reasonable case to be made that these were given out of generosity.”

Right. Gifts. Gifts are what people give you when you get married. Gifts are what you give your friends when they move to the suburbs because you’ll never see them again. Gifts are what you give your friends’ (who moved to the fucking suburbs) kids because if you show up empty handed, you look like a complete dick.

These items are not gifts. The Yankees wanted the ball, Levine asked Lopez what he wanted and he told them what items would do the trick. TA-DA, we’ve got a deal. Besides, I’m guessing if Christian Lopez is the kind of guy to hand over the ball that was Jeter’s 3,000th hit, he isn’t too caught up thinking about the tax consequences of falling bassackwards into some tickets and priceless (to a Yankees fan, anyway) memorabilia.

UPDATE: Standup guy status CONFIRMED:

“Worse comes to worse, I’ll have to pay the taxes,” he told the Daily News on Monday. “I’m not going to return the seats. I have a lot of family and friends who will help me out if need be. “The IRS has a job to do, so I’m not going to hold it against them, but it would be cool if they helped me out a little on this.”

Returning Jeter’s Big Hit: No Good Deed Goes Untaxed (Perhaps) [NYT]
Christian Lopez, fan who handed over Derek Jeter’s historic 3,000th-hit ball, will owe IRS thousands [NYDN via DB]

Eric Cantor Describes Debt Ceiling Debate Using the Most Unimaginative Expression Possible

“We don’t believe that we ought to be raising taxes right now on people in this recession and in this economy, and they do,” the majority leader added.

“That is just an irreconcilable difference, and if the president wants the debt ceiling, we’re not going to go along with that if they want to raise taxes, and it just is what it is.”“That is just an irreconcilable difference, and if the president wants the debt ceiling, we’re not going to go along with that if they want to raise taxes, and it just is what it is.” [The Hill]

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]

After Today’s Job Report, Eric Cantor Can’t Imagine Why Anyone Would Think Raising Taxes Is Good Idea

” ‘Disappointing’ is an understatement,” Cantor said on the floor in a colloquy with House Minority Whip Steny Hoyer (D-Md.). Cantor was citing the jobs report for June that said only 18,000 private-sector jobs were created in that month, and that the unemployment rate increased to 9.2 percent.

“Just look at the jobs report today,” Cantor added. “I cannot fathom how anybody, how anyone thinks right now is a good time to raise taxes. Who thinks that raising taxes on individuals and small businesses can help create jobs?” [The Hill]