Category: Tax

Section 409A: Worst Tax Enactment of the Decade

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for thumbs down col.gifEditor’s note: Welcome to GC’s first edition of “Taxes: Because We’re the Little People” by Joe Kristan. Joe Kristan is a tax shareholder for Roth & Company, a Des Moines, Iowa CPA firm, where he works with closely-held businesses and their owners. Prior to helping start Roth & Company, he worked for two of what are now the Final Four CPA firms. He writes the Tax Update Blog and is available for seminars, first communions, Bar Mitzvahs, etc.
Sure, those Northwest pilots who missed Minnesota were off the mark. So was Arthur when he signed off on the Enron audit. But as badly as they missed the target, they look like Annie Oakley compared to Congress in its response to Enron.
Congress takes aim at the national firms whose audits failed to spot the looting at places like Enron. The result? SarBox, the greatest gravy train for the Final Four firms since the invention of the senior accountant.


The Congressional response on the tax side took a different approach. Rather than reward the guilty, they chose to beat the innocent. Hence Section 409A.
The Enron scandal featured elaborate deferred compensation plans to provide executives a gilded liferaft when the ship sinks. Congress responds with a code section affecting schoolteachers. They showed Ken Lay what for by designing a tax on folks on money they may never see because of somebody else’s foot fault.
Sec. 409A clobbers its victims two ways:
• It taxes employees on their deferred comp balances when the plan is out of compliance, even if the employee doesn’t get the money, ever.
• It hits them again with a 20% excise tax.
Worse, the code section imposing these penalties is so complicated that it took 3 years to complete the regulations that run to 200 pages, and are so complicated and intrusive that accidental noncompliance must be rampant.
This all makes Sec. 409A my choice as the worst tax enactment of the decade. But tastes differ. Let us know your nominee for the worst tax provision enacted from 2000 through 2009 in the comments and if we get some good submissions, we’ll put it to a vote.

Luckily for Nicolas Cage, Ghost Rider 2 Is In Development

raising.arizona.073007.jpgToday in getting-sued-by-your-ex-but-my-name-isn’t-Steven Cohen news, Nicolas Cage is now being sued by his ex-girlfriend, Christina Fulton for $13 mil.
She’s claiming that Ghost Rider and his accountant, Samuel Levin (no relation), were really not very fucking good with the money and now she owes $1 million to the IRS annnnnd she has $250,000 in credit card debt annnnnd she lost her house.
If that’s not enough, Cage and Levin already don’t think too much of each other as they’ve been suing/countersuing each other over whether Cage sucks more at spending money ($1.6 million comic book collection) or Levin at managing it (risky real estate investments).
Good luck lady. The ex-Mrs. C’s chances seem better.
Nicolas Cage’s Ex Sues Him and His Former Accountant [Web CPA]

1099s Are All Evidence We Need to Conclude That Tiger Paid for Sex

tiger_woods2.jpgBy now, we’re sure you’ve heard that Madam Michelle Braun has claimed that Tiger Woods not only paid $60k for sex but that both Holly Sampson and Jamie Jungers, two of T. Dubs [insert most recent number here] mistresses, were prosties for her.
It doesn’t sound like Tiger got down with either of the them while they were hooking for Braun (it was just regular throwing money around type stuff) but the Post does quote Braun about TW being a big fan of the ‘girl-on-girl’ action and ‘booze and sex bender[s].’
ANNNNNND they’ve got 1099s for both Sampson and Jungers. So does anyone doubt that the greatest golfer the world has ever known is basically the same as Eliot Spitzer? We’re sure convinced!
Seriously, if a madam goes to the trouble of filling out 1099s for non-employee compensation, we’ve got no reason to disbelieve anything she says.
You may now return to your regularly non-accounting related Tiger Woods coverage.
Woods ‘bought’ cathouse gals [NYP]
jungers_sampson_1099.pdf
Also see: Lesson Learned: Even Madams Pay Their Taxes [Tax Girl]

Is Charlie Rangel a Closet NASCAR Fan?

Charlie Rangel_NASCAR.jpgMaybe! Joe Kristan tells us that the Ways and Means chair is “[proposing] to ‘pay for’ the extension of forty five tax provisions that expire every year or so with an increase on the taxes on hedge funds and private equity funds.”
At the expense of the PE and hedge fund industry no less! Rangs is screwing people in his own back yard to give tax provisions to race car fans? Does this seem especially bassackwards to anyone else?
Tax Update Blog:

Among the 45 provisions are special depreciation rules for “motorsports entertainment complexes” and an “alternative motor vehicle credit for heavy hybrids.” Because heaven knows we need NASCAR and heavy hybrids more than we need private equity investment.

Being the dapper gent that he is, Rangs no doubt has several of his favorite drivers’ jackets hanging up at all of his rent-controlled apartments. You cannot deny the fashion genius of the bow tie/Snickers jacket combo.
Beating on Private Equity to Save NASCAR [Tax Update Blog]
See also: Rangel Identifies $30b of Tax Increases to Pay for 45 Tax Extenders [TaxProf Blog]

SHOCKER: Tax Reform Will Have to Wait

Thumbnail image for Thumbnail image for Tax Code.jpgIf you’re like us, you’ve been anticipating the report on tax reform from the President’s Economic Recovery Advisory Board like teenage girls jonesing for New Moon.
Unfortunately, the report has been delayed and the Board will only be issuing “an almanac” of ideas at this point. The original deadline was for this Friday but you know how that goes.


Apparently you heeded the call put forth by the White House because they’re still reviewing all your brilliant ideas:
Tax Vox (our emphasis):

The White House statement says the board has not yet had time to review the hundreds of ideas it has received from the public. At the time same time, it asked for more suggestions. Yet, it is hard to believe that the panel is going to hear much new. After all, the ground of simplification and enforcement has been pretty well-plowed for years.

So keep those ideas coming people. Anything goes. Abolishment? Sure, they’ll think about it. Taxing the stupid? Best idea we’ve heard so far. If you’ve got suggestions, drop them here first then ring up the WH. They’re waiting.
White House Tax Reform Report Delayed Until Next Year [Tax Vox]
Also see:
President’s Tax Reform Task Force to Miss Dec. 4 Deadline to Issue Report [TaxProf Blog]
Tax Reform Panel: Something Someday [Tax Update Blog]

Arnold is Probably Thinking That This Is One of Those Situations Where a Cyborg from the Future Would Have Come in Handy

Thumbnail image for arnold.jpgIt just doesn’t seem possible that his Govinatorness would have a tax lien slapped on him because A) he’s married to a Kennedy and B) his annual Kindergarten Cop royalties alone should be enough to cover $79k.
Despite those two advantages, the IRS did file a lien in May for $79,064 that relates to 2004 and 2005, according to TMZ.


The claim by the Governor’s minions is about what you would expect them to come up with: a ‘paperwork snafu.’ In all fairness, the code section cited on the lien is 6721 which, as Tax Girl notes, is informational in nature:

Section 6721 deals with information returns, not taxes owed…Information returns would include such ordinary forms W-2, W-3, 1099, 1096, etc. If that’s the case, it could likely be related to household employee payroll taxes (household employees would include workers such as housekeepers and nannies). However, Schwarzenegger’s office is strongly hinting at the fact that it’s more removed than that – but then, they are politicians.

The other possibility that’s being floated around is that Ahnuld is “listed as a ‘responsible person’ by a business in which he is involved, possibly with a group of partners, and that the IRS might file liens against all of the business’s designated agents,” and thus, “might explain why Schwarzenegger may not have been aware a lien had been filed.”
So, as usual, no one really knows anything for sure and nobody is talking. The man has been a failed state to run people, he can’t be expected to be on top of everything.
Schwarzenegger’s Office Blames $79,000 Tax Lien on ‘Paperwork’ Snafu [Mercury News]
The Governator Blames Tax Lien On “Snafu” [Tax Girl]
See also: IRS Files $79k Tax Lien Against Gov. Schwarzenegger [TaxProf Blog]

Wesley Snipes Doesn’t Want to Deprive the Public of His Art

WesleySnipesR.jpgSo he simply can’t do three ‘unreasonable’ years in prison. Nevermind that he was convicted of “willful failure to file his income tax returns,” the cultural community simply cannot be do without the likes of The Art of War II: The Betrayal.

Snipes was sentenced in April 2008 in what was considered a key victory for prosecutors who aggressively pursued the maximum penalty to deter others from trying to obstruct the IRS. They say he made at least $13.8 million for the years in question and owed $2.7 million in back taxes that he refused to pay.
Snipes apologized at the time, calling himself an idealistic artist who was “unschooled in the science of law and finance.”

The man A) apologized and B) had a good excuse: he is AN ARTIST. He can’t possibly be expected to make heads or tails of this tax law rigamarole, so three years? C’mon. Let it slide 11th Circuit. Besides, vampires are all the rage right now so Blade is bound to get hot again. Just you wait.
Wesley Snipes appeals 3 tax convictions in Georgia [AP]
See also: Wesley Wants to Walk [Tax Update Blog]

Joe Francis to Declare Bankruptcy, Owes IRS $34 Million

Thumbnail image for Joe-Francis.jpgTragic news from the world of wholesome entertainment as Joe “Back to the business at hand of slapping women” Francis is allegedly going to declare bankruptcy tomorrow after receiving liens for nearly $34 mil.
Not such a good thing for Francis since he just hammered out a plea deal two months ago.
According to Tax Girl, that plea agreement, “requires him to resolve his outstanding tax issues. I mean, it is a resolution – but I’m guessing not so much what IRS had in mind.”
They certainly aren’t apologizing for this one.
Girls Gone Wild Founder To File Bankruptcy, Blames IRS [Tax Girl]
Other GC Coverage of Joe Francis:
SHOCKER: Joe Francis May Have Attracted Slimy Business People
Joe Francis Plans to Argue That Anything Related to Topless Girls is Deductible

Charlie Rangel’s Name to Appear on Tax Scofflaw Website?

charlie rangel.jpgMaybe! The State of New York remains in a fiscal crisis and is so desperate for money that apparently all ideas are being considered. According to the Daily News, the latest bright idea from Albany is to publish the top 200 businesses and the top 200 individual delinquents on the Internet apparently to shame those delinquents into paying their share.
Everybody seems to think it’s a good idea but can’t agree on who should be handling it. The State Tax Department would prefer that they put the list up themselves but legislators in Albany smell populism:

Tax officials say they oppose the law, preferring to enact the measure administratively.
Given the fiscal crunch, the state tax department has already increased its efforts to go after tax scofflaws.
The department can’t commit to creating a list until it explores the “resources we need,” particularly in a time of fiscal crisis, Burns said.
[Assemblyman William Colton (D-Brooklyn)] said he wants it done soon. “When the state desperately needs dollars to provide services to schools, hospitals and nursing homes, we don’t have time to wait,” he said. “We need to get this program implemented.”

Well played, Assemblyman. But obviously the important question is: will Rangs have to give up his rent controlled apartments? It’s important.
Expose tax cheats’ Web of deceit – pols [NYDN via TaxProf Blog]

Hungarian Actresses Are Not Immune from Tax Troubles

zsazsa.jpgThe last thing you want if you’re a celebrity is money troubles. Whether you’re punching your shiesty accountant, simply spacing your tax liabilites, or just spending too much, it’s downright embarrassing. You’re a celebrity, for crissakes!
What’s worse if you’ve got money trubs because you lost scratch to Bernie Madoff. Sure if you’re Kevin Bacon, you can get by on the Footloose royalties but what about people who seem to be famous for no discernible reason? Unless being a “Hungarian actress” and “socialite” qualify as reasons.


Tax Girl has the details on Zsa Zsa Gabor’s trubs because of Berns:

The 92 year old actress has been liened by the Internal Revenue Service for $118,000 for the years 2001 and 2002; the lien has been filed against one of Gabor’s mansions in California. Gabor’s lawyer, Chris Fields, says that the tax bill is part of the fallout from the Madoff scheme.

Luckily for Zsa Zsa, her ninth husband, Frederic von Anhalt, whored out his own name: “Anhalt has reportedly received millions of dollars by selling the Anhalt name by adopting, along with Zsa Zsa, several men.” There’s no cause for concern, as he’ll be picking up the bill. Celebrity embarrassment has been avoided!
Why FvA gets paid to adopt his own wife and a bunch of dudes isn’t entirely clear. Annnnnd in case that’s not weird enough for you, TG points out that Fred also claimed to be the father of Anna Nicole Smith’s baby. So now an asston of pharmaceuticals are likely relevant in some way. The awesomeness has reached a new level.
It’s a Tax Lien, Dahling [Tax Girl]

ACORN Stonewalled on VITA Funds but Questions Remain

Vita_logo.gifYesterday the IRS released the list of recipients of $8 million in matching grants for the Volunteer Income Tax Assistance program. Many of you participated in this fine program back when you were focused on developing a drinking problem, which may explain the high error rate but that’s neither here nor there.
Of the 360 applications submitted for funds, one notable organization that was DEEE-NIED was ACORN.
Despite the grave dancing that is likely going on in certain corners of the media, is anyone asking the important questions here? Including but certainly not limited to:
• Who will real sex workers depend on for tax advice?
• What non-profit organization will the two “investigators” entrap next?
• Will Glenn Beck finally calm down? He has appendicitis for crissakes.
Questions worth noting. If you have answers to any of these, kindly enlighten us in the comments (without suffering from an aneurysm).
IRS Leaves ACORN Off VITA Grant List [Web CPA]
IRS Awards $8 Million in Grants to 147 Organizations for Tax Prep Assistance — $0 to ACORN [TaxProf Blog]
No IRS VITA “Seed” Money for ACORN [Tick Marks]

Someone Had to Explain to Joe Francis that He Didn’t Have to Go Back to Jail

Thumbnail image for Joe-Francis.jpgJoe Francis was sentenced to time served late on Friday for his guilty plea on two counts of filing false tax returns and one count of bribing Nevada jail workers in exchange for food. He had spent a total of 301 days in prison.
Apparently this was such a surprising turn of events that when he was outside the courtroom Francis seemed unsure about what happened saying, “I think we won that one.” Authorities resisted taking advantage of Francis’ bewilderment and he was not escorted back to jail.
In addition to the time served, Francis received one year probation and was ordered to pay $250,000 in restitution. This allows Francis to get back to ‘the business at hand‘ which must involve assaulting Playboy Playmates and then claiming it was self-defense. Good to have you back, Joe.
Judge OKs plea deal from ‘Girls Gone Wild’ founder [AP]
Girls Gone Wild Founder Gets Plea Deal [Tax Girl]
‘Girls Gone Wild’ Founder Joe Francis Gets Time Served in Tax Case [TaxProf Blog]
Earlier GC Coverage: SHOCKER: Joe Francis May Have Attracted Slimy Business People
Joe Francis Plans to Argue That Anything Related to Topless Girls is Deductible