Category: Tax

SHOCKER: Volunteer Tax Preparers Have High Error Rates

Forty-one percent per a Treasury Inspector General for Tax Administration report. Luckily, the TIGTA has suggestions:

TIGTA recommended that the IRS analyze the accuracy of returns prepared at individual volunteer sites to identify patterns and concerns on which to focus education, training and accountability. The report also suggested that the IRS improve the intake sheet that is used at the start of the tax prep process to include questions based on new tax laws and filing status, and improve the reviews of intake sheets and returns completed at volunteer sites.

The TIGTA anonymously sent auditors to volunteer testing sites which seems pretty unfair. If those sneaky bastards had reviewed the tax returns instead of Monday morning quarterbacking the volunteers maybe there would’ve been less mistakes. Just a thought.

Volunteer Tax Preparers Have High Error Rates [Web CPA]

Millionaires Are Getting Hated On in California

Thumbnail image for california.jpgThese days the rich get hated on pretty much everywhere but millionaires in California have extra room to bitch now. The California Court of Appeals has rejected a taxpayer’s challenge to Proposition 63, “which imposed a 1% tax on annual incomes in excess of $1 million to fund state mental health services”.
The plaintiffs were claiming that they (and their fellow millionaires) were singled out: “In [the plaintiff’s] view, wealthy individuals are singled out to bear the burden of a public expense, while others are excused from that burden.” Yeah, non-millionaires. You mind chipping in?
Plus, the plaintiffs don’t really see the how their money and helping non-millionaire crazy people are even connected. From Jensen v. California Franchise Tax Board:

In this instance, the Taxpayers object that individuals with high incomes do not have a particular need or use for the mental health services funded by Proposition 63, i.e., there is not connection ‘between the group being assessed and the use of the funds collected.’ The argument fails, because there is no need to contrive a link between the taxpayer and the services being funded.

So apparently just because you’re a lunatic millionaire and can afford private mental health services doesn’t mean you get out of funding state-run mental health services. According to the court, millionaires need to help out the crazies that can’t afford to go to fancy-schmancy hospitals regardless of the lack of relevance.
Oh, and btw, the Plaintiffs are the real victims here, “The Taxpayers perceive themselves as victims of a populist movement to ‘soak the rich.'” How would you feel if you were a victim of a populist movement? People with torches and pitchforks outside your house. Nightmare. Think about the what the millionaires are going through, people.
California Court Upholds 1% Tax on Millionaires [TaxProf Blog]

Tax Evasion Convictions Still Work For Chicago Gangsters

Thumbnail image for al-capone.jpgChicago is maintaining it’s decades-long tradition of putting mobsters in prison not for murder, not for racketeering, but for tax evasion.
Rudy Fratto pleaded guilty to tax evasion yesterdy which could result in a sentence of 12-18 months. He admitted to not paying $140,000 in taxes he owed on $800,000 earned from 2001-2007.
Despite being from a family of alleged mobsters, association with crooked cops, and an alleged threat to a government witness in another mob case, Fratto will simply take 2010 off.
It’s unlikely that this particular story will result in a historically inaccurate movie starring Kevin Costner but at least it demonstrates the consistency of Chicago law enforcement.
Reputed mobster admits tax evasion [Chicago Sun-Times via Roth & Company, P.C.]

Deadline Watch: The Tardy Client

box of receipts.jpgA little over 24 hours from now, anyone that is currently up to their asses in 1040s will grab the nearest person and try to shameless make out make out with them like it’s V-J Day.
Between now and then however, a client will call some of you DEMANDING that you complete their return that has a dozen K-1’s and a mind-numbing AMT calculation, before the midnight deadline. Oh, and they don’t want to pay any tax.
You, typically being the mild-mannered accountant, just up and lose your shit on this unsuspecting client, who then realizes their tardiness is the cause of this little conundrum, not your lack of a magic wand.
Congrats! You’ve successfully convinced a client that they’ll be filing late, paying a penalty and hereby suck at life. They deserve it anyway, asshats. Feel free to discuss your favorite delivery of last minute bad news to clients and enjoy the next 24 hours, 1040 trolls.

Deadline Watch: October 15th

crawling.jpgOne week until all is right with the entire world, tax preparers. Oh sure, maybe since partnership returns are now due on September 15th, the October deadline doesn’t have the same urgency as in years past but at the very least, it marks the official end to another tax season.
There are still plenty of you that are still slogging through 1040s though, so hang in there. If you’ve got any last minute meltdowns or clients that are giving you serious heartburn, let us know or discuss in the comments.
The rest of you, commence schadenfreude. Unless you like the week leading up to a deadline. Sickos.

The IRS Will Pay You for Snitching but You Better Have a Big Fish and Don’t Mind Waiting

IRS_logo-thumb-150x140.jpgRecently we discussed snitching on tax cheats in the UK and we speculated that tax rats Stateside would be less common because of the increasing trend of hating (or just plain killing) on the Federal Government.
Well, we were dead wrong. Since Congress passed the Tax Relief and Health Care Act of 2006, the payouts to whistleblowers increased from a maximum of 15% of the recovered proceeds to a maximum of 30%. So far the temptation is working as tips to the IRS have increased to 476 for the latest fiscal year (9/30) compared to just 116 in the previous year.
Continued, after the jump


The catch is that the IRS doesn’t want to hear about your elderly neighbor that’s running numbers out of their basement for extra cash. No, they want the serious scofflaws, according to the Tax Girl, “the tax, penalties, interest, additions to tax, and additional amounts in dispute must exceed $2 million for any taxable year (that’s the sother restrictions also apply).”
So if you crunch the numbers, you can see there’s plenty of motivation to flip on someone if you know they are a tax dodger. Problem so far is that because of the boring arcane nature of tax law and the swiftness of the American court system, not one payout has occurred to date.
Plus, the law isn’t exactly encouraging the most honest of folks to come forward when you consider that Joe Francis’s accountant ratted him out only to be accused of shenanigans himself. And as Joe Kristan points out, “…there is always something creepy about the IRS being able to horn in on confidential client-professional relationships…”
The IRS probably isn’t worried too much about who gives them the information, just as long as they get it, so they’ll probably make a run at this with an imperfect system and with sources of questionable motivation for the time being.
If You Pay Them, They Will Come [Tax Girl]
Informant Program Spurs IRS Whistleblower Tips [Web CPA]
30 Pieces of Silver or 30 Percent of the Gross [Roth & Company, Tax Update Blog]

Snitching in the UK Must Not Be a Big Deal

Thumbnail image for bubbles.jpgThe UK version of the IRS, Her Majesty’s Revenue and Customs, is looking for snitches.
Apparently the tax collection sitch has gotten so dire across the pond that the HMRC now needs ordinary folks to come forward out of the goodness of their hearts or their desire to screw over their personal nemeses, since the “HMRC says it takes all allegations seriously”.
We probably don’t have to tell you how well this would go over in the States. If they’re hanging volunteers for the census bureau in Kentucky, imagine what would happen if you called up the IRS to tell them about their neighbor not reporting the value of the keg beer they drank for helping you paint your house.
Snitch on your neighbours: HMRC [Accountancy Age]

The President Wants Your Ideas On Tax Reform

obama_point.jpgNo, seriously. Get on this. Now before you libertarian types start screaming for abolishment or fans of Teve Torbes start demanding a flat tax, the Briefing Room Blog states that, “The mandate to the [President’s Economic Recovery Advisory Board] is NOT to recommend a new tax system.” Their emphasis, so that means they’re serious. No messing about the current system because it’s just fine, thanks.
So, sorry people, taxation with incompetent representation will continue but this is your chance to get off your asses and at least pretend like you’re making something happen.
Do your part, after the jump


But don’t even think about raising taxes on the middle class, however you choose to define it, “They were instructed not to consider options that involve raising taxes on families making less than $250,000 per year. So be mindful of their constraints when submitting ideas.”
There, now if you had career changing moment this week, this is your chance to give back. So take a week to think about it and then sober up and get to work. You’ve got until October 15th, a familiar deadline. See? They’re thinking about you.
Tax Reform Subcommittee Requests Ideas [Whitehouse.gov]
President Obama Wants Your Tax Reform Ideas [TaxProf Blog]

Joe Francis Can Now Get Back to ‘the Business at Hand’

Joe-Francis.jpgA judge has convinced ‘some brilliant legal minds’ and prosecutors with some slimy witnesses to reach a plea agreement in the Joe Francis tax case.
Francis’s original plan to argue that anything related to topless girls was obviously a ‘business expense’ was apparently too confusing for prosecutors to understand.
The defense attorneys also must have realized that Judge James Otero may have been on to something when he suggested that they settle before trial.
More, after the jump


AP:

Otero told prosecutors during a hearing earlier this summer that they should consider resolving the case before it went to trial. He had also questioned Francis’ ability to control himself in the courtroom during the trial, nearly sending him to jail when he learned that Francis had taunted a prosecutor.

Definitely a shocking revelation that Joe Francis wouldn’t be able to control himself, being the purveyor of class that he is. However, perhaps we judge to quickly as it sounds like he has grown through this whole ordeal, which included nearly a year in jail:

“The one thing I’ve learned about myself during this process is that I can be a difficult client, but they are a fantastic group of brilliant legal minds who recognized the truth when they saw it and had the passion to care about what happened to me,” Francis wrote in his statement.

The truth has been recognized, friends. We can all comfortably move on.
Plea deal ends ‘Girls Gone Wild’ founder tax case [AP via TaxProf Blog]

Someone Has a Dangerously Unhealthy Love for Preparing Tax Returns

ilovemyjob.jpgSomeone must really love preparing tax returns if they violate an injunction prohibiting them from doing just that.
“A man who had been barred five years ago from preparing tax returns and representing clients before the IRS was convicted of violating the injunction by continuing to do so.”
Most people that prepare tax returns would love to be banned from preparing them. They could get on with their lives that way. This guy has the good fortune to be told not to do it and he keeps at those tax forms like he’s on some romantic, Don Quixote-esque quest.
Continued, after the jump

..Prosecutors claimed that Mattatall attempted to evade detection by not signing the returns as the paid preparer and by using an alias when representing customers…At the conclusion of the trial, the judge cautioned Mattatall to re-evaluate his positions on the tax laws, warning him that he faces the possibility of a very tragic turn in his life if he continues down his current path.

We’re no Freud but this seems borderline obsessive.
The judge obviously recognizing that this man was completely deranged offered the touching plea, “he faces the possibility of a very tragic turn in his life if he continues down his current path.” Sorta sounds like, “Seriously man. Find something else to do. Anything.”
Tax Preparer Convicted After Violating Injunction [Web CPA]