HR 2267: Much Ado About Nothing

Posted on July 29, 2010 by Russ

Online poker players and the Poker Players Alliance are celebrating the markup and passage of HR 2267 in the House Financial Services Committee. The measure passed the committee on a vote of 41 yes, 22 no, with one Congresscritter voting “Present.” The measure can now be taken up by the full House of Representatives.

The good news is that Congress is actually considering licensing and regulation of online gambling (primarily online poker). That said, this measure has almost no chance of becoming law in this session of Congress.

First, in order for it to be voted on in the House the Speaker of the House, Nancy Pelosi (D-CA), would have to allow it to come up for a vote. She’s opposed to the measure so that in itself likely dooms it. Additionally, there is a companion measure (HR 4976, previously HR 2268) must pass the House Ways and Means Committee. No hearing or markup on that bill has been scheduled.

Even if HR 2267 somehow comes up for a vote in the House and passes, it would still have to pass the Senate. It’s far tougher for the measure to pass in the Senate given the rules of the Senate: Any Senator can place a ‘hold’ on legislation. Given that Senator Jon Kyl (R-AZ) is vehemently opposed to the measure, that’s likely. There’s additional opposition from Democrats, too, including both of California’s Democratic Senators (Barbara Boxer and Dianne Feinstein).

We are getting closer to having legal online gambling in the US, though. I’ve been telling friends that we were at least five to ten years away from legalization and regulation in the US. Now, I think we’re about five to ten years away from passage. It will likely take that long for a measure to get through both houses of Congress and signed by the President. It took nearly ten years for a measure inhibiting online gambling to pass Congress (the Unlawful Internet Gambling Enforcement Act of 2006). It will probably take just as long for a measure authorizing online gambling to pass Congress. Still, this is progress.

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Rangel Hit With 13 Counts of Ethics Violations

Posted on July 29, 2010 by Russ

Congressman Charlie Rangel (D-NY), the former chairman of the tax writing House Ways and Means Committee, has been charged with 13 ethics violations. The charges include failing to report the rental income on property in the Dominican Republic on his tax return, not disclosing all of his assets on his financial disclosure forms, violating a ban on gifts, and soliciting funds from from an individual who might be impacted by the performance of his duties. A trial on these charges will likely be held in September.

Of course, this is, according to Speaker of the House Nancy Pelosi, “The most ethical Congress in history.” Yeah, right.

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As the Budget Churns (2010 Edition)

Posted on July 28, 2010 by Russ

California’s constitution required a budget be enacted by June 30th. Californians ought to ask June 30th of what year as there are no negotiations in Sacramento right now. Meanwhile, there was some news from Governor Schwarzenegger. He told reporters today, “If I do not get all of the things that we need … I will not sign a budget, and it could actually drag out until the next governor gets into office.” Democrats’ response is that the Governor threatens children and public education.

What does Governor Schwarzenegger want? He is demanding changes to public pensions, and to California’s budgeting and taxation systems. He opposes Proposition 25 (on the November ballot); that ballot measure would eliminate the two-thirds voting requirement in the legislature for passing a budget and replace it with a simple majority. To no one’s surprise, labor unions and Democrats are in favor of Proposition 25 and the California Chamber of Commerce opposes it.

Meanwhile, Californians are caught in the middle. There is a cost for not having a budget. Instead of making the budget cuts today that are going to happen, those cuts will be made sometime in the future…and those cuts will have to be larger in order to have a balanced budget. It appears that Democrats in Sacramento are more than willing to wait it out.

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She Can’t Take It With Her

Posted on July 27, 2010 by Russ

I thought I’d seen most of the methods of hiding cash from the taxman, but this short story is a new one. It seems that a British businessman decided that his aunt needed £140,000 to accompany her to the hereafter. Well, the businessman owed £50,000 to Her Majesty’s Revenue and Customs (formerly Inland Revenue, the British equivalent to the IRS).

His aunt couldn’t take it with her…and neither was the businessman successful in burying his cash.

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Relief for Non-Profits

Posted on July 27, 2010 by Russ

I don’t do much work for non-profits, but there was a deadline just weeks ago and important news today. All non-profits are now required to file a version of Form 990. The deadline was May 17th, and non-profits that ignored this deadline were theoretically no longer a non-profit.

The IRS announced that they are providing relief for some non-profits. Those non-profits with gross receipts of $25,000 or less can file the e-postcard Form 990-N by October 15th. Non-profits with revenues of less than $500,000 and assets of under $1.25 million and who have three or fewer delinquent returns can file Form 990-EZ and all required schedules by October 15th. These non-profits will be required to pay a small fee of between $100 and $500 but they won’t lose their non-profit status (assuming they file).

However, non-profits that must file Form 990 and private foundations that file Form 990-PF are not eligible for relief.

On the IRS webpage linked to (above) are links to non-profits that the IRS believes still need to file a version of Form 990.

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Trading a Cellphone to a Porsche

Posted on July 25, 2010 by Russ

Recently, I saw a short blurb on the local news regarding a teenager who bartered his way from a cellphone to a Porsche. There’s an issue with this, of course, taxes. When you barter goods, you’re supposed to send a Form 1099-B to the other person (to represent the difference in the value of goods).

So let’s say I trade my worthless cellphone (valued at $10) for your worthless headset (valued at $10). No big deal. However, say I trade a worthless cellphone for an iPad (worth $300). The other person is supposed to send me a Form 1099-B showing $290 value of bartered goods.

It turns out that the teenager made 14 trades to go from a cellphone to a Porsche. Clearly, he should have received a few 1099-B’s en route. Perhaps he did, but I suspect otherwise.

In any case, just a reminder that if you barter your cellphone for a $9,000 used Porsche, you should expect to pay taxes on the difference in value.

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Government to Snipes: It’s Time to Head to ClubFed

Posted on July 25, 2010 by Russ

With the recent ruling from the Court of Appeals denying Wesley Snipes’ appeal of his three misdemeanor tax convictions, the US Department of Justice has asked that Snipes head to ClubFed now. Mr. Snipes’ attorneys plan on responding to this shortly.

In any case, Mr. Snipes should not plan on being in any movies in the next year or two other than the ClubFed production of The Producers.

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$50 Here, $50 There: $50 From Me and Every Other EA, CPA, and Tax Preparer

Posted on July 23, 2010 by Russ

I received an email yesterday from my local IRS liaison:

IRS Issues Proposed Rules Setting Fee for Tax Preparers to Get Unique ID Numbers
By Diane Freda

The Internal Revenue Service July 21 issued proposed rules (REG-139343-08) establishing a new annual $50 user fee for individuals who apply for or renew a preparer tax identification number (PTIN).

The much-anticipated guidance is the first step in setting up a regime of registration with the IRS that will in essence create a new profession of government-sanctioned tax preparers, IRS officials have said in recent forums.

IRS is anticipating that the number of individuals requesting PTINs will increase to as many as 1.2 million under the new registration program, and all individuals who receive or have received PTINs will be required to renew them in the future, the guidance said.

In March, IRS proposed rules requiring tax return preparers who prepare all, or substantially all, of a tax return or claim for refund after Dec. 31 to obtain a PTIN. Further, those rules specified that the PTIN would be the only allowable identifier going forward, as part of a multiprong approach to new and sweeping oversight of the tax preparation industry.

Attorneys, certified public accountants, and enrolled agents have had to obtain a PTIN from the IRS Office of Professional Responsibility and to adhere to that office’s standards of competency and conduct. But IRS officials said that hundreds of thousands of other practicing tax preparers have never before been required to have a PTIN and have been unregulated by any agency at the national level.

The $50 fee to apply for or renew a PTIN is based on an annual renewal period, and the procedures for renewing a PTIN will be provided in other guidance, IRS said, including forms and instructions. The user fee is nonrefundable, regardless of whether the applicant receives a PTIN or not, IRS said.

This is the first step in the IRS’ plan to force every tax preparer to register. The idea is that the IRS will have a database of PTINs covering everyone. Additionally, electronic filing is being mandated on all preparers (100 or more returns by a preparer mandates electronic filing next year; 10 or more returns in 2011). The combination will, in the view of the Office of Professional Responsibility, allow them to stop unscrupulous tax preparers by shutting them down. (No valid PTIN, no ability to prepare a return).

A question that’s obvious is what about the unscrupulous preparers who buy a copy of TurboTax and then prepare returns for fees and just print out copies that say “self-prepared”? The IRS plans on using some of the money raised to have an advertising campaign. In the ads the IRS will tell the public that a preparer is required to put down his or her PTIN (if you pay to have a return prepared).

If you already have a PTIN, you will be required to re-register your PTIN and pay the $50.

The IRS justification for the fee is:

The user fee also will recover costs for personnel, administrative, and management support needed to evaluate and address tax compliance issues of individuals applying for and renewing a PTIN, to investigate and address conduct and suitability issues, and otherwise support and enforce the programs that require an individual to apply for and renew a PTIN.

There will be a public hearing on August 24th, and comments can be made until that date on the rules.

The official regulation is here. Comments can be made:

Via mail: CC:PA:LPD:PR (REG-139343-08), Room 5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044; or
Electronically via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG-139343-08).

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WordPress 3, Russ 0

Posted on July 23, 2010 by Russ

A ton of stuff has happened over the past week…but I’ve been unable to post.  You see, WordPress “upgraded” to Version 3.0 and locked me out of the blog.  Now, that wasn’t supposed to happen but it did. Unplanned ‘vacations’ are always fun….

With the help of Brian Cribb I’ve been able to get the blog back up. We’re still tweaking it (you might have noticed the new theme–comments welcome on that), and there will likely be some changes in the coming weeks. I’ve got a bunch of stuff to get up and you’ll be seeing me catch up throughout the day.

My real vacation is in a week (and there won’t be any posts then). Hopefully, the next upgrade will go smoother.

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Snipes Loses Appeal; ClubFed Is on the Horizon

Posted on July 16, 2010 by Russ

Remember Wesley Snipes? The actor was convicted of three misdemeanor tax charges but has been free on bail while waiting for the 11th Circuit Court of Appeals to decide his appeal. Bad news for Mr. Snipes: “After thorough review, we affirm the rulings and judgment of the district court in all respects.”

The Appellate Court decision is available here. There’s nothing humorous in the decision, just a terse shoot-down of all of Mr. Snipes’ arguments. The most interesting part of the decision is the Court noting that misdemeanors can be just as serious as felonies, and it’s the amount of the tax loss that impacts sentencing.

The district court noted that misdemeanants who, like Snipes, had willfully failed to file their personal income tax returns had engaged in similar behavior to the felons who had received similar sentences. The guideline does not create disparity of the kind that would violate 28 U.S.C. § 991(b)(1)(B)…

The district court also did not err in finding that Snipes’s instruction to Baker to refuse to comply with the subpoena and his threat that “if you do contact them, you will have to pay the consequences” constituted obstruction of justice. We have long held that encouraging another person to avoid complying with a grand jury subpoena may be considered to be obstruction…

Although Snipes argues that there were mitigating factors that the judge did not specifically mention at sentencing, these facts — his college education, his family, and his charitable activities — do not compel the conclusion that the sentence crafted in accordance with the 18 U.S.C. § 3553(a) factors was substantively unreasonable. The district court acted well within its considerable discretion in sentencing Snipes to thirty-six months in prison.

While Wesley Snipes can attempt to appeal the case to the US Supreme Court, that court rarely hears tax cases, and its even rarer for the Supreme Court to hear a pedestrian case such as this. Realistically, Mr. Snipes will soon have to surrender to the Federal Bureau of Prisons for a three-year stay at ClubFed.

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