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The IRS Is Ruining Its Weekend Plans for the Sake of the American Taxpayer Again

The April 15th deadline has come and gone but that does not mean the IRS’ work is done. In fact, getting money in the Treasury Department’s door is a 24/7/365 sorta deal and in case you didn’t notice, there’s a bit of a deficit problem.

Accordingly, the IRS has decided to host open houses at 200 facilities in all 50 states, DC, and Puerto Rico on May 15th from 9 am to 2 pm local time (locations here). IRS staff will be there to help individuals and small businesses sort out any issues they may have (See? Filing that extension was a good idea).


This marks the second time in 2010 that the IRS has opened its arms to public on the Sabbath, having done so on March 27th. According to the Service, that particular National Day of IRS Friendliness was a resounding success, with 88% of taxpayers getting their issues resolved that day.

Doug Shulman all but assures your satisfcation in the press release, “Our goal is to resolve issues on the spot so small businesses and individuals can put any issues they have with the IRS behind them. If you have a problem filing or paying your taxes or resolving a tough tax issue, we encourage you to come in and work with us.”

Okay, maybe it’s not exactly a 100% money-back guarantee but the Service is going to work their cans off to get you in compliance and cutting a check that day. Unless of course you’re a Tea Party type trying to get on the six o’clock news, in which case you’ll be dealt with in a swift and decisive manner.

Open House on Saturday May 15 to Help Small Businesses, Individuals Solve Tax Problems [IRS.gov]

Closely-Held Corporations May Want to Take a Bullet Over the Pending Dividend Tax Hike

As a role model, Andrew Jackson has serious shortcomings, not least his penchant for genocide. But some of his policies are back in vogue, like the casual destruction of the national banking system. Taxpayers may be choosing to be like Andy in another way before the end of t had the bad fortune to get crossways with Charles Dickinson, one of the best pistol shots in Tennessee, when dueling was still fashionable. He met his antagonist across the state line in Kentucky, where duels were legal. Jackson was serious about this one, so he decided to take all the time he needed to do Dickinson in. Given Dickinson’s marksmanship, that meant accepting a bullet. Sure enough, Dickinson’s shot hit home:

The bullet struck him in the chest, where it shattered two ribs and settled in to stay, festering, for the next 39 years. Slowly he lifted his left arm and placed it across his coat front, teeth clenched. “Great God! Have I missed him?” cried Dickinson. Dismayed, he stepped back a pace and was ordered to return to stand on his mark.

Blood ran into our hero’s shoes. He raised his pistol and took aim. The hammer stuck at half cock. Coolly he drew it back, aimed again, and fired. Dickinson fell, the bullet having passed clear through him, and died shortly afterward.

Taxpayers owning C corporation stock might also want to take a bullet, figuratively speaking, this year. That’s because the tax rate on dividends will either leap or soar in 2011.

The increase in the dividend rate is a consequence of the scheduled expiration of the 2001 Bush tax cuts after this year. Prior to the Bush administration, dividends were taxed as ordinary income. As dividends are distributions of corporate income already taxed at a corporate rate as high as 35%, that meant a combined rate of 57.75%. The Bush tax cuts tied the dividend rate to the capital gain rate, now 15%.

When the Bush tax cuts expire, the capital gain rate is set to return to 20%. But without Congressional action, dividends will again be taxed as ordinary income. Given the size of the deficit, the poisonous election-year political atmosphere, and that the President promised to hold the dividend rate to 20%, it’s likely that dividends will be taxed as ordinary income in 2011. That would means a 164% increase the top dividend rate.

But wait, there’s more! Starting in 2013, Obamacare will tack another 3.8% to the top rate on investment income, resulting in a top dividend rate of of 43.4%, making the total tax increase over 189%.

This makes it tempting to take the bullet – a big 2010 dividend out of a closely-held C corporation. It will be especially attractive for shareholders who lack the ability to suck out corporate cash using the usual tricks of shareholder bonuses or rent payments.

Yes, it means taking a bullet. Taking dividends out of closely-held corporations breaks the rules of the C corporation tax planning crib book. Taxpayers go to elaborate lengths to avoid taking income before they have to. But a 189% tax increase might be enough to make some taxpayers take the bullet, like Andy, for the greater good.