Category: Tax

Some New Jersey Taxpayers Can Put Off That 1040 For Awhile Longer

Are you dreading April 15th North Jersey? Thought so. With just over a week to go until deadline, it may have crossed your minds that you should start tearing your house apart for that W-2.

Well, you can postpone the treasure hunt for now because the IRS is showing mercy on you for the Biblical rainfall that poured on the Garden State last month.


The IRS announced on Monday that they are delaying the filing deadline “for taxpayers who reside or have a business in the disaster area. This includes the April 15 deadline for filing 2009 individual income tax returns, making income tax payments and making 2009 contributions to an individual retirement account (IRA).”

The counties declared a disaster area by the POTUS include Atlantic, Bergen, Cape May, Essex, Gloucester, Mercer, Middlesex, Monmouth, Morris, Passaic, Somerset, and Union and thus qualify for the extended deadline, which is now May 11th.

New Jersey makes the third state allowed a prolonged procrastination period, joining counties in Massachusetts and all of Rhode Island.

Don’t try to get cute though, Garden Staters, if you’re thinking you can falsely claim residency in one of the affected counties, the IRS will be all over your shit, “IRS computer systems automatically identify taxpayers located in the covered disaster area and apply automatic filing and payment relief.” So appreciate the compassion if you can get it but don’t get any ideas; the IRS is still watching.

New Jersey Severe Storm and Flooding Victims Have Until May 11 to File Their Tax Returns [IRS.gov]

IRS Commish: We’ll Send You a Letter if You’re Uninsured, Not Heavily Armed Agents

This is disappointing on a multitude of levels. On the one hand, the notion of thousands of IRS agents running around the country, kicking doors is kind of exciting.

On the other, if crazed tax-haters can’t threaten the lives of IRS Agents who can they threaten? The census only occurs once every ten years and threatening to gun down OSHA employees just doesn’t seem to be as effective.


Doug Shulman spoke at the National Press Club yesterday and assured everyone (despite what Dave Camp or Ron Paul says) that agents will not be storming your house packing heat if you don’t purchase insurance. The IRS will be counting on insurance companies to help them run identify those who are skipping on the required coverage.

He said insurers eventually will be required to file a document similar to Form 1099 used by financial institutions to report investment income. The agency will send letters to the uninsured notifying them fines could be deducted from their tax refunds for refusing to comply with the new law, Shulman said.

“These are not the kinds of things we send agents out about,” Shulman said. “These are things where you get a letter from us.”

We imagine the letter won’t be particularly friendly but it’s a far cry from jack-booted thugs pointing firearms at your head.

Shulman Says IRS Has Few ‘Punitive’ Ways to Enforce Health Law [Bloomberg BusinessWeek]

Tea Partiers Taking Serious Measures, Arrange Virtual March with Avatars

The Tea Partiers (not to be confused with tax protestors who are way more delusional) have made their names known all across this great land for hating on taxes. They’ve marched pretty much everywhere but do you know where they haven’t marched? On the Internet! That’s right, nothing like a virtual march with politicians up for reelection joining the cause (can’t be seen with those nutjobs in person).

The “march” will occur on, you guessed it, April 15th and it will occur “in” Washington DC.


Some of the other cartoon leaders that will be in “attendance” are

• Former House Majority Leader Dick Armey

• Former Arkansas Governor Mike Huckabee

• Americans for Tax Reform president Grover Norquist

• Senator John McCain (R-AZ)

• Michael Reagan, son of former President Ronald Reagan

• The Tea Party Express – A red bus.

We have to admit that we’re impressed with this risky move by this group that we would otherwise shun a technological feat of this magnitude. Does anyone think that Dick Armey or John McCain even knows what an avatar is? What lucky member of their respective staffs got the responsibility of creating those?

This is especially fun for the tea p’s because since this particular march is virtual, it is likely that certain actions and/or methods that the tax haters could only dream of before, will now be allowed. These may include but not limited to:

• Leaving flaming bags of shit on White House’s front steps.

• Protestors showing “video” of President Obama walking around wearing a Sandwich Board saying “I love taxes.”

• Resurrecting the Founding Fathers (zombie TJ!) to get their testimonials about how the Obama Administration is ruining America.

• Portray Nancy Pelosi giving a speech on the Capitol steps in one of those olive-colored Castro outfits.

• Bring Ronald Reagan back to life, just because.

• Other portrayals of “taxation without representation” taken wildly out of context.

All we ask is that you keep it non-violent. Tea p’s that aren’t too good with them computers need not worry though, actual marches will be held around the country on April 15th where you’ll be allowed to shout, march and carry signs with plenty of misspelled words.

Tax Protesters Launch Online March on Washington [Web CPA]
Online Tax Revolt [Website]

You Can Blame the Tax Code for Expensive Baseball Tickets

Since it’s opening day for baseball, there are probably a few of you (non-tax accountants) that are at the ballpark enjoying sun, overpriced beers and, if you’re lucky, some complimentary tickets on behalf of your firm.

If you happen to be shelling out your own hard-earned money however, you’re no doubt aware that price of your tickets continue to go up season after season. Throw in $9 beers and Brother Jimmy’s BBQ and you’ll spend a small grip just to enjoy a day of sport and no work.

What’s the cause of the skyrocketing cost of attending a baseball game, you ask? The tax code of course!


That’s according to an op-ed by two professors, Duke law professor Richard Schmalbeck and Rutgers business professor Jay Soled, in today’s Times.

There are many reasons for the price explosion, but a critical factor has been the ability of businesses to write off tickets as entertainment expenses — essentially a huge, and wholly unnecessary, government subsidy.

These deductions have led to higher ticket prices in two ways. On the demand side, they have fueled competition for scarce seats, with business taxpayers bidding in part with dollars they save through the deductions.

On the supply side, the large number of businesses bidding for expensive seats has driven the expansion of luxury skyboxes and a reduction in overall seats in new ballparks.

The authors note that baseball was, until the 1970s, a “populist sport” and fans of all economic classes could attend games for a reasonable cost. Those days are long gone and the professors blame the ability of corporations to deduct business-entertainment expenses as the culprit. They state that you not need look further than the opening of the new Yankee Stadium that has “3,000 fewer seats than its 1923 predecessor but almost three times as many skybox suites.”

The professors advocate a limit on deductions for on luxury tickets to a low fixed amount (e.g. $50). They cite the outright elimination as “unrealistic” but we can’t recall at time when “realistic” and “Congress” collided in a sentence.

We agree with our esteemed colleague at ATL that if you really want to stick it to the companies who take advantage of tax code’s generous provisions, just make skybox tickets non-deductible altogether.

As the authors note, Corporate America has a love affair with sports-related perks and we’d guess that eliminating the deduction would not stop them from buying luxury tickets. The client relation types in your firms know that there is an intangible value to wooing potential clients in some comfortable confines as opposed to cramped seating in the stands with the commoners.

Throw Out Skybox Tax Subsidies [NYT via ATL]

Fans Help Thomas Hearns Pay Tax Debt By Purchasing Decades-Old, Sweat-Encrusted Items

Thomas Hearns has no doubt seen the embarrassment that some of his fellow celebrity/athletes have suffered as the result of their tax scofflaw ways and decided that he would only suffer minor embarrassment. Hearns made over $40 million during his career but managed to owe back taxes of $448k, not to mention over $500k in overdue mortgage payments.

Rather than drag the proceedings on further, Hearns decided to get proactive on this little obligation and decided to hold an auction of memorabilia and other personal items to satisfy his debt. And since the bulk of Hearns’ career existed when boxing was still somewhat legitimate, these particular items probably still had some semblance of value to collectors/hoarders of random shit.


Items sold included a robe from a bout with Sugar Ray Leonard for $1,100, to trunks, gloves, headgear, ATVs, boat, ’57 Chevy. Pretty much anything that touched Hearns body that had ever been stained by sweat, blood, and any other bodily secretions (and those of his opponents) were auctioned off to satisfy the debt.

Hearns admitted to the Detroit Free Press that this all seems a little ridiculous considering the money he made, “I made a lot of money in boxing. But as a man who had a large family, people looked at you as their savior. You tried to help them by giving. It doesn’t stop. I’m the big brother — I give and I give.”

Ahhh, yes. The free-loading relatives. The types that don’t pay you back for that grip you loaned them for a [insert luxury vehicle of choice]. Should have known. Luckily, true fans of the boxer are more than eager to own funky jock straps to help out the champ.

Thomas Hearns, at auction, rolls with punches [Detroit Free Press]
Boxing legend Thomas Hearns risks losing home [Tax Watchdog]

Possible New Tax Forms Under Healthcare Reform

As we plod into the glistening new vistas of Obamacare, what sort of wonderful tax returns await us there?

The biggest change, one that will hit every 1040 from the simple 1040-EZ to the full-blown 1040 starting in 2014, will be the new “personal responsibility payment.” The PRP is the marketer’s name for a fine for not having an approved health insurance plan.


We’ve mentioned some of the weird enforcement problems this will bring – problems addressed in more technical detail here. The PRP can’t possibly work withrting – the individual numbers are just too small, and the IRS can’t audit everyone. If they are ever serious about this, there will have to be a new information reporting form issued by the health insurers, something like the 1098 form. The form will need to have the taxpayer’s social security number, and maybe some new number identifying the taxpayer’s IRS-approved health insurance plan. We’ll call this Form 1098-BCBS.

The 1040s will have a new form, or at least a new schedule – we’ll call it Schedule DRE. Schedule DRE will have a space to put the number from the 1098-BCBS, or lacking that, boxes to check for why you have failed to do your part to support health care in this great nation. If you don’t check the right boxes, there will be further lines to compute your PRP, which can range as high as 2% of your income. The final tax will carry to the taxes summary at the bottom of the second page of the 1040.

In the higher rent district, there will be new forms, or at least worksheets, to compute the two new Medicare taxes that apply starting in 2013. An additional .9% wage tax will apply to wages over $200,000 for single filers, $250,000 for joint returns, and $125,000 on married filing separate returns. While employers of single taxpayers who employ them all year will cover their tax through withholding, single job-switchers and married taxpayers will have to do this weird new computation on their 1040s somewhere. This one isn’t indexed for inflation, so we should all be there in a few years.

The wage tax computations will be childs play compared to the new 3.8% tax on “unearned income” – a phrase reeking of chutzpah, coming as it does from freaking Congress. This tax applies not only to old-fashioned investment income – interest, dividends and capital gains – but to royalties, rents, and to “passive” income from partnerships and S corporations. Auditing this tax may require all 16,000 of the new IRS agents called forth by Obamacare. “Passive” is defined here by the Sec. 469 rules, which were enacted to deal with tax shelter losses. Tax preparers will need to be very careful in distinguishing “passive” from “non-passive” income in many cases where it never used to matter.

IRS agents will have a field day trying to trip up folks who liked the income to be “passive” when it enabled them to use other losses. This will stimulate the economy of high-end tax consultants, who will quickly earn enough to qualify for the tax themselves, where they don’t already.

The unearned income tax tax will apply to the lesser of “unearned income” or the amount adjusted gross income exceeds $200,000 for single filers, $250,000 on joint returns ($125,000 on separate returns). So a new form will have to add up the “unearned” income from Schedule B, Schedule D, Schedule E, and maybe Schedule F, and compute the tax, which will also carry to the nether regions of Schedule 1040, page 2.

There will be plenty of other changes applying to 1040s between now and whenever Obamacare fully kicks in. There is a nice timetable here.

The IRS isn’t waiting to prepare to enforce these new rules. Going Concern has obtained an exclusive early draft of Schedule DRE.

It Literally Took an Act of God* for the IRS to Do Something Nice

There’s a slew of “reasons” that people have for hating on the Internal Revenue Service. They’re responsible for discourse on television, they don’t observe Shabbos, perverts (alleged!), etc.But every now and again the IRS gives you a reason to say, “well, that’s nice of them,” even if it takes rainfall that makes you consider cobbling an ark together and rounding up the animals in the neighborhood.


The Service is not unreasonable. Apologetic? Never. But not unreasonable. Accordingly, if you live in eastern Massachusetts or Rhode Island the IRS took notice of the rising waters and is extending the April 15th deadline to May 11th (?).

It’s unlikely that this will garner much favor with the IRS haters outside of the Northeast but at least the Service won’t have to ignore the flood of calls from Bay State and Ocean State residents about whether they’ll still be expected file on time. Grab a bucket.

IRS will delay April 15 deadline for many in Mass. [Boston Globe]
Flood weary Rhode Islanders get tax extension [AP via Globe]

*For the militant atheists – Calm down, wouldja? It’s a religious week. Just sub “Nature” and move on.

More Tax Clients for Ludacris (or His CPA)

As you’re no doubt aware, the IRS has taken exception with the notion that many of our favorite celebrities and athletes can do no wrong. As detestable as this thought might be, Doug Shulman and his merry band of tax collectors are not impressed with these pillars of the community turning a blind eye to their patriotic obligations.


Some of the latest examples of celebrity tax avoidance:

• Corey Feldman – Technically it’s Corey Feldman Inc. that owes the IRS $31k but same diff.

• Faith Evans – Widow of Notorious B.I.G. Grammy winner. Soon-to-be reality TV star. The combination of these things somehow doesn’t allow her to scrape together $360k.

• Mel Blount – Okay, we have to admit that we don’t know who the hell this guy is but the sports historians and the entire city of Pittsburgh are probably familiar. For everyone else – he’s a former Steelers’ cornerback that was elected to the Hall of Fame in 1989. He owes taxes for every year from 1994 to 2006 (with the exception of ’07) for grand total of $652k. Seriously, this is f—ing ridiculous. Even Nicolas Cage manages to file a tax return once a decade. There’s not one CPA in all of the ‘Burgh that can help this guy?

As the title indicates, our advice to these people is to get in touch with Luda “I pay more in taxes than most people would ever imagine” cris ASAP. Whether he’s mastered TurboTax or managed to find a solid CPA, it doesn’t matter because, as you might recall, “you will never hear about Ludacris owing the damn IRS no damn money.”

Source: Tax Watchdog

States Are Coming Up with Some Really Bad Ideas for Taxing Services

Yesterday we explained why sin taxes can work, despite the feelings of those that just want to tell the religious types to GTFO of the legislative process. While we agree that religious based legislation is a bad — nay — a horrendous idea, since more states refuse to legalize and tax certain things like marijuana, gambling, prostitution, among others, our elected officials have started coming up with even far worse ideas that the Texas pole tax.


The Times ran a story over the weekend that examined various states and what types of services they are taxing to close their budget gaps. While many states are considering taxes on professionals like lawyers and accountants, legislators in other states have gotten so desperate it appears they’re just pulling ideas straight out of their asses:

In Nebraska, a lawmaker has introduced a bill to tax armored car services, farm equipment repairs, shoe shines, taxidermy, reflexology and scooter repairs. In Kentucky, Jim Wayne, a state representative, and some fellow Democrats are proposing taxing high-end services: golf greens fees, limousine and hot-air-balloon rides, and private landscaping.

In June, voters in Maine will decide whether to accept a state overhaul of its tax system that would newly tax services like tailor alterations, blimp rides, and entertainment provided by clowns, comedians and jugglers.

We get it. States are desperate for revenues but these are the ideas? A juggler tax? Taxing your shoe shines? How’s this idea for taxing a service? Prostitutes! A service is being provided, yes? Make it a 50% tax, whatever the hell you want. Plus, more people getting laid might actually cut down on the crazies taking matters into their own hands.

We decided to get a service provider’s (not a prostie) thoughts on the matter, so we asked resident GC tax expert Joe Kristan for his thoughts:

Being a service provider myself, I can’t say I’m excited about the idea. Still, standard tax theory would say that services should be covered to make the tax as broad as possible, allowing (in theory) a lower rate. Iowa taxes a bunch of services, including foot reflexologists (you’d thank that would take care of the budget right there), but CPAs and lawyers are exempt. I’d say it’s because we’re special, but mostly it’s because we have special lobbyists.

All right, so maybe there’s a “theory” to it but something tells us it has nothing to do with taxing clowns.

States Seeking Cash Hope to Expand Taxes to Services [NYT via Web CPA D&C]

Doug Shulman Takes It as a Compliment That the IRS Is the ‘Go-to’ Government Agency

If you’re a member of the AICPA the biggest benefit you enjoy is not the prestige, not the certificate that you have mounted on your wall but the Journal of Accountancy that shows up in your mail every month. It’s really solid that your firm shells out good money on an annual basis so you can add new Excel tips to your spreadsheet wizard repertoire.

JofA manages to talk to a number of high profile as well, which you would expect from a behemoth professional journal. Case in point, when we received the latest month’s issue we couldn’t help but get a little giddy seeing Doug “Help me, help you” Shulman. We flipped to the Q&A immediately after seeing his handsome mug on the cover only to find the Commish’s picture at right. It makes us think that he’s channeling Monty Burns, which some of you probably find appropriate.


The Q&A is pretty much what you would expect, touching on the new preparer regulations, “We ran a very open, transparent, public dialogue about this,” to threatening offshore tax scofflaws, “The U.S. government is getting very serious about rooting out offshore tax evasion,” and warning whistleblowers not to expect that money any time soon, “[T]his could take multiple years to get the awards out. But I’m a big fan of the program.”

A couple of more interesting statements, include how excited Dougie is that all the assignments that other government agencies don’t want, get dumped on the service, “it’s…a big compliment that we’re seen as a ‘go-to’ agency in government.”

That being said, this particular interview was certainly conducted prior to the passage of the healthcare reform bill and no mention of the IRS’ role in enforcement (or lack thereof) was brought up. Maybe if the JofA had seen the Bill O’Reilly/Anthony Weiner throwndown it would have been a stop the presses moment.

The only other thing worth noting is that pizza parlors around the country might want to tighten up the ship in the coming months, “We will build features into our technology system so if we see, say, a pizza parlor that says they had $90,000 of sales last year and it shows that they had $85,000 of credit card sales and we know that pizzerias have a lot of cash sales, that will be a red flag. We’ll use it to better target our audits, to see where there’s potential noncompliance, and then we’ll use it to better focus our resources.”

Maybe the Commish is just giving an example of what a red flag is but using this particular example rather than say, a celebrity, seem peculiar. Just leave Di Fara alone, okay?

Tax From the Top: Q&A With IRS Commissioner Doug Shulman [Journal of Accountancy]

Here’s Why Most Sin Taxes Aren’t Stupid (Hint: It Makes More Things Legal)

Elie Mystal, the Editor of our sister site Above the Law, did a fair amount of kvetching over the Texas “pole tax” on Friday. He focuses primarily on his distaste for sin taxes, “I can’t avoid sin taxes — and thus I can’t stand them. First of all, they are regressive. Secondly, they’re anti-business. So we literally have a tax regime that freedom-loving progressi conservatives should hate, and yet sin taxes continue to be an acceptable way for the government to shove its morality down our throats.”

We’ll address that statement in a minute but first, we’ll examine the pole tax which supporters have stated, “is an appropriate exercise in state power — promoting public safety by discouraging the ‘combustible combination’ of drinking and live nudity.”


Elie’s thoughts:

Nude women + alcohol = rape? What kind of sex crazed sociologist came up with that equation? Just because boobs and beer make your sick ass go out and terrorize females doesn’t mean that other males are incapable of telling the difference between fantasy and cold, lonely reality.

And if this is a serious problem — what the f*** is $5 going to do about it? Texas legislators want us to believe that there is an epidemic of sexual assaults occurring because of the “combustible combination” of alcohol and live nude girls, but they also want us to believe that a $5 surcharge is going to make a difference.

We agree with Elie that Texas has come up with a bad — nay — horrendous idea. An extra $5 at the door isn’t going to accomplish a damn thing. Strip clubs are highly “combustible” environments regardless; taxing patrons to get them to think twice before entering doesn’t make a lot of sense.

Where Elie is dead wrong is his notion that “Either [the behavior subject to tax] is a serious societal problem that the government needs to step up and make [it] illegal — or it isn’t. If it’s not that big a deal, then what is a sin tax other than the government trying to get a taste of a lucrative American business?“

We have a problem with the “step up and make it illegal” part. The decriminalization and taxation of certain “sins” is a perfectly good way for states to raise money since taxes on income and property are far more political and thus, not effective.

Alcohol and tobacco both cause a myriad of health problems in humans that can result in high medical treatment costs. Taxes on these items are appropriate in order to supplement the burden that they place on society as a whole. Drugs and prostitution are, for the most part, criminalized. Thousands of people are arrested and jailed yearly for engaging in these behaviors, imposing millions of dollars in costs to taxpayers. Here’s a newsflash: human beings are not — ARE NOT — going to stop engaging in these behaviors. So why not take the “criminal” element out of the equation?

If they were to be made legal, highly regulated and taxed, states could enjoy new revenue streams and citizens can engage in behavior that they choose. That’s something many “freedom loving progressives” can certainly get behind. Plus, if drugs and prostitution are legal, won’t this encourage entrepreneurship and a more competitive marketplace? That sounds like something “money-loving conservatives” would approve of.

So while we’re with Elie railing against Texas’ impotent legislation, sin taxes are useful when implemented intelligently. California is putting legalized marijuana to a vote and DC may not be far behind so maybe we’re beginning to see some common sense for a change.

No Sin Taxes in the Champagne Room [ATL]
Earlier:
Texas Stripper Tax Will Survive One More Valentine’s Day