Category: Tax

Alan Grayson Attempts to Explain Why He Doesn’t Support the Tax Cut Deal

The only problem is, MSNBC host Lawrence O’Donnell (an unabashed Democrat who supports the deal) IS NOT HAVING IT.

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Some favorite moments:

• “I use that term specifically, ‘caved in.'” – Because that’s what Dems do, baby!


• Circa :54 – any use of the term ‘pernicious’ is welcome in our book; Some bald guy is shaking his head incessantly; Arianna Huffington looks like an amused heiress (which is what she always looks like).

• At 2:27 – Larry officially starts flipping out.

• “You are WRONG, sir.” – Grayson is already fanning the heat with his hands at this point.

• “When you’re out of office in January and watching this from the sidelines.” – Too soon!

• At 3:25 there’s an audible sigh by Grayson that gives us the impression he can’t keep from laughing.

• “BE AN ADULT ABOUT THIS CONGRESSMAN!”

[via BI]

The House Will Have a Half-Ass Vote on Tax Cuts Tomorrow

Don’t get too excited, the vote will only be on the tax cuts for those of you earning less than $250k. The vote that really counts (for the people that may be able to afford Snooki!) is being slapped onto the extension of unemployment benefits.

Jake Sherman at Politico:

The bulk of the tax cuts — for lower and middle-class incomes — will be considered in a separate vote on Thursday. Democrats have long sought to only renew tax breaks for households under $250,000 in income, but Republicans have insisted on an extension of current tax rates for everyone.

Right, then. So this is a political play by the Democrats to show everyone that they don’t suck as much as the election results would have you believe. Republicans, however, do not care for this maneuver. Rep. Dave Camp (MI) is especially annoyed and evokes small business in the process:

“This is disappointing and a sign of bad faith after the president agreed to bipartisan, bi-cameral talks. There will be bipartisan opposition to the Democrats’ push to raise taxes on small business,” Camp said.

Gotta say, it is a pretty shrewd move by the Democrats (where was this spunk in October?) but at least everyone will have to get off their ass tomorrow and do something. God forbid the Republican members of Congress actually vote on something during the lame duck session.

House Democrats set Thursday tax vote [Politico]
House GOP Balks at Middle-Class Tax Cut Vote Scheduled Thursday [Fox News]

IRS Commish Reminds Congress That If They Blow Off Tax Policy, We’ll Have a Giant Mess on Our Hands

There’s a small part of us that hopes the lame-o Congress just throws their hands up and lets all the outstanding tax policy issues expire, just to see what the fallout would be.

While we wish no harm to our practitioner friends like Joe Kristan, watching the pols in Congress squirm from the wrath of the American populace would be rather enjoyable.

Doug Shulman, on the other hand, does not share our impish impulses and wrote a letter to Congressional members on the Senate Finance and House Ways & Mean Committees, reminding them that if they let this one get away, his agency will have one hell of a mess on their hands.


Reuters has some excerpts:

“Of course, if legislation has not passed by the end of this year, our computers will have been programed incorrectly and we will need to delay filing for these individuals,” he said in a letter to the top lawmakers on the congressional committees charged with tax policy.

Realizing that the members might not quite understand what all this crazy-talk means, the Commish gave some details:

“It would be an unprecedented and daunting operational challenge to open the tax filing season under one set of tax laws with respect to AMT and extenders, begin accepting tax returns, and then have the law change,” Shulman wrote.

So essentially, re-doing a bunch of work. Nobody wants that. Luckily for everyone involved, Shulman appears to understand that while dysfunction is standard operating procedure on the Hill, most CPAs prefer providing above average client service.

Some People Aren’t Convinced Nancy Pelosi Wants to Compromise on Tax Cuts

President Obama is darn sure that a deal will get made on the expiring tax cuts before the end of the year despite the ‘logjam’ between the two political parties.

He’s confident because hard-working families need it, the economy is fragile yada yada yada and now that Tim Geithner and OMB Director Jack Lew are on the case, this thing is a shoe-in.

While the next Speaker of the House, John Boehner, is not quite on the same page as the President, he’s pretty much in the same chapter:

“Republicans made the point that stopping all the looming tax hikes and cutting spending would, in fact, create jobs and get the economy moving again,” said Representative John Boehner, who will become Speaker of the House next year.

“We’re looking forward to the conversation with the White House over extending all of the current rates, and I remain optimistic,” he said.

Well, as close as to the two will likely get in public anyway. However, this a slightly more optimistic stance than what some people have for Nancy Pelosi, who would, presumably, rather give up her Armani suits than hand the wealthy a tax cut:

“There is some thought that the last thing that Nancy Pelosi wants to do on her way out of the Speaker’s office is to have Congress approve an extension for tax cuts for the wealthy,” said Brian Gardner, an analyst for investors at Keefe, Bruyette and Woods.

“She could muck things up a little bit.”

Well! This should be fun! Stay tuned.

Obama and Republicans agree to negotiate on taxes [Reuters]

Vastly Unpopular 1099 Requirement Survives Thanks to the Reliable Dysfunction of the U.S. Senate

Everyone’s favorite Two Minutes’ Hate from the healthcare reform legislation – the 1099 reporting requirement – managed to live to fight another day despite being as unpopular as the Democrats who originally got behind it (although don’t look at Nancy Pelosi).


As is the wont of Senate, this sliver of bipartisanship was foiled by…wait for it…politics:

The provision survived because of the complex politics of the Senate. Some lawmakers were reluctant to back repeal on Monday since the rule change would have been added to a popular food-safety law that is nearing approval, potentially jeopardizing its passage. In addition, dueling Democratic and Republican proposals allowed lawmakers to register their disapproval of the 1099 requirement whether the repeal passed or not.

In other words, everyone agrees that they hate this thing but they hate it in different ways. You see, it’s not enough to be against the 1099 requirement, it matters who gets the credit for being against so much that they actual introduced the proposal to do away with it.

Sigh. But it’s cool, the rule doesn’t actually go into effect until 2012, so blowing it off for another 12 months is totally an option. And a pretty realistic one, too.

Senators Cannot Agree on Fix to the Health Law [NYT via CPA Success]

Should Derek Jeter Be Asking for a Stake in the Yankees?

Fay Vincent is making the suggestion that sports stars, like DJ, should be negotiating for shares of their respective teams.

My question is why sports figures are not taking steps to generate tax-favored income by bargaining to get ownership interests in their teams. Imagine how much better off old timers like Mickey Mantle and Roger Maris would have been if they had been able to obtain even tiny shares of the Yankees franchise in 1961. In today’s context, it is true enough that the tax rate on capital gains income may soon rise to 20%—but that’s still far below the rates levied on top income earners.

Since Vincent – a former entertainment lawyer – has been around the block with big-time earners, he might be on to something here, although maybe the Steinbrenners aren’t interested, being the shrewd business family that they are (George died in a year with no estate tax for crissakes). Since neither Jeets nor the Yanks are budging in the negotiations, this idea could work. It’ been floated in the Times so it’s not like this option is a huge secret. Make something happen, people.

By most accounts, Jeter wants to finish his career in New York and the man has been the franchise for over the last decade. Forget the cash, ask for shares and save on some taxes. It’s not complicated.

Okay, maybe it’s a little complicated.

Chris Van Hollen Isn’t Buying the “Tax Cuts Create Jobs” Story

In case you needed another sign that we are heading full speed towards a stalemate on tax policy, the Representative from Maryland would like to be recognized for calling BS on the popular Republican rhetoric:

“It’s clear that the tax cuts for the folks at the very top have not created any jobs. After all, we’ve had them in place now for more than eight years, and we know what the jobs situation is,” Van Hollen said during an interview Monday on MSNBC.

“The notion that you’ve got to continue them in order to somehow boost the economy, when those are in place right now and we have a lot of people unemployed, is a clear indication that they are not a big job creator.”

Eric Cantor’s rebuttal will sound similar to this:

“Taxes shouldn’t be going up on anybody right now.”

[…]

“This election … was really the American people saying they are tired of the lack of results in Washington,” he said. “They want to see more jobs for more Americans. They want to see us … cut government spending, rein in the size of government so we can get this economy growing again. That was the prescription, that was the mandate that came from the people.”

So there’s no middle ground to be found here, guys? No chance you can put down the ideological rhetoric for the sake of, ya know, screwing the American people?

Van Hollen: Tax cuts for wealthy ‘not a big job creator’ [The Hill]

You Realize We Will Be Without Wesley Snipes for Three Years, Don’t You?

Sure, it could be shortened for reasons that can’t currently be foreseen but this is a huge blow to the culture…oh, to hell with it.

Judge Terrell Hodges was fed up with this circus and dude is going to jail.

Wesley Snipes was ordered on Friday to start serving a three-year prison sentence for a felony tax conviction after a Florida judge rejected his bid for a new trial.

“The Defendant Snipes had a fair trial … The time has come for the judgment to be enforced,” U.S. District Judge Terrell Hodges said in his ruling.

S Corporations are Entity of Choice; 68% of S Corps Misreport

A recent IRS study shows that S corporation return filings (Form 1120S) increased dramatically and continue to be the most prevalent type of corporation filing. For Tax Year 2006, almost 2/3rds of all corporations filed a Form 1120S. The total number of returns filed by S corporations for Tax Year 2006 increased to nearly 3.9 million, from nearly 3.2 million reported in Tax Year 2002 and 722,444 in 1985. In 2006, there were 6.7 million S corporation shareholders. S corporations became the most common corporate entity type in 1997.


According to IRS data, about 68% of S corporation returns filed for tax years 2003 and 2004 (the years data were available) misreported at least one item. About 80% of the time, misreporting provided a tax advantage to the corporation and/or shareholder. The most frequent errors involved deducting ineligible expenses. Even though a majority of S corporations used paid preparers, 71% of those that did were noncompliant.

Reasonable compensation still an issue for S corporations – The GAO report also focused attention on the loophole that allows shareholders to reduce payroll taxes by reducing wage compensation. The IRS admitted that their efforts to enforce the adequate compensation rules for S corporation shareholders have been limited. For fiscal years 2006 through 2008, the IRS examined less than half of one percent of S corporations who filed.

Misreporting of shareholder basis is also a common problem, permitting shareholders to claim excess losses averaging $21,600 per taxpayer based on IRS audits for the period 2006 to 2008.

(Note: The above information was excerpted from Vern Hoven’s manual used in CPE Link’s Federal Tax Update: Part 4 webcast.) Webcasts are scheduled November-January. In Part 4, you’ll get an update on all corporate changes, partnership changes, and IRS audit issues.