Dentist Who Investigated the Income Tax Gets 33 Months

Posted on December 10, 2007 by Russ

Back in September, I noted the case of Lakeland, Florida dentist Nancy Montgomery-Ware. During her trial for tax evasion, she “figured out” that the income tax isn’t allowed under the Constitution. She also said that her husband told her she was crazy. It didn’t take long for a jury to find her guilty.

Last week was the sentencing hearing for Ms. Montgomery-Ware. She now said that it was her husband that made her commit the crime and that she didn’t want to do it. She also said that she was in an abusive relationship and her attorney asked that the judge stray from the sentencing guidelines so that she could raise her child. And she paid the full $326,000 tax bill.

Still, some time at ClubFed was in the cards. Judge James Moody sentenced Ms. Montgomery-Ware to 33 months and a $25,000 fine. She had to pay the price for committing a crime.

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Traveling Again

Posted on December 6, 2007 by Russ

I will be traveling again over the next few days, so posting will be light until next Wednesday. Should an AMT patch make it to the President, I will definitely post on that.

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Senate Passes AMT Relief, But Future of Bill Uncertain

Posted on December 6, 2007 by Russ

Late today the Senate passed a one-year Alternative Minimum Tax (AMT) patch that did not have any corresponding tax increases. The measure will now go to the House where it faces an uncertain future.

The House had passed a two-year patch that contained corresponding tax increases. As I mentioned previously, there’s no chance that an AMT patch which contains tax increases can pass the Senate nor would it be signed by President Bush. However, that doesn’t mean that House Democrats have figured that out.

Other tax measures which are scheduled to expire were removed from the AMT legislation. A separate bill on those “extenders” will soon be introduced. However, because it will contain corresponding tax increases it, too, faces an uncertain future.

Meanwhile, tax forms (which will almost certainly be wrong) are being printed at the Government Printing Office, and I and other tax professionals will have to explain to clients why the forms are wrong. As I said before, I expect that by April 15, 2008 all of my hair will be gray.

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Snipes Trial May Be Delayed Until April

Posted on December 6, 2007 by Russ

Wesley Snipes’ defense attorneys will ask next Tuesday to delay Mr. Snipes’ trial until April. The trial is currently scheduled to begin in January in Ocala, Florida. The defense attorneys, according to Ocala.com, received 1.6 million pages of material from their discovery motions and need additional time to go over the material.

This request seems a lot more reasonable than their request to move the trial to New York City because a fair jury is impossible to come by in central Florida.

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61 – 0

Posted on December 4, 2007 by Russ

That’s the score in the epic battle between Larry Harvey and Randall Preheim. Mr. Harvey has represented 61 taxpayers who resided in Antarctica and wanted to take the Foreign Earned Income Exclusion. Mr. Preheim represented the IRS.

Antarctica is still not a continent, and it’s 61 losses and counting for Mr. Harvey. Joe Kristan likens this to the battle between the Roadrunner and Wile Coyote. I liken it to the Washington Generals, who achieved an enviable record of 6 wins to 13,000 losses.

I hear the Generals are due for a win soon….

Cases: Role v. Commissioner, McDonald v. Commissioner, and Owens v. Commissioner

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R.I.P. Larry McCarthy

Posted on December 4, 2007 by Russ

Larry McCarthy, President of the California Taxpayers’ Association, lost his struggle with cancer. He was 59.

Mr. McCarthy was a tireless champion of taxpayers in a state where many legislators’ views of taxpayers is how do we find a new tax to impose. He fought for taxpayers rights for over 30 years. He will be missed.

A tribute page to Larry McCarthy is here.

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Michigan Replaces Service Tax With Business Surcharge

Posted on December 3, 2007 by Russ

Michigan is in a recession. In fact, it has been in a recession for several years. So what do you do to attract businesses in a down economy? Do you (a) lower taxes and cut government spending, (b) do nothing, or (c) raise taxes and continue to increase government spending?

Well, since I have a cynical outlook on how government works I wasn’t surprised with the outcome. Michigan raised taxes and continued to increase government spending (albeit at a reduced rate of increase). Michigan imposed a business services sales tax of 6% effective December 1st.

That tax met with universal scorn among Michigan business owners and residents, and Michigan’s legislature repealed it. Well, I should say they replaced it. Now Michigan has a 21.99% surcharge to Michigan’s business tax.

The surcharge is supposed to bring in $600 million this fiscal year and $750 million next year. It’s unlikely to generate that revenue. The natural reaction when a tax is imposed is to do whatever behavior you can to lessen the tax’s impact. And one obvious impact will be for businesses that can to shift tax-generating activity out of Michigan and into other states.

Assume you’re a business owner and have two manufacturing plants: one outside of Detroit and one outside of Phoenix. You need to expand operations. Will you do that in your Detroit plant and pay extra tax? In fact, might you not consider closing your Detroit plant and shifting all of your operations to Phoenix?

Michigan has slapped a Band-aid on a very leaky wound, and in the long-term it won’t work. Businesses that can will still flea the state and Michigan’s long-term recession will continue. The only solution is to make Michigan attractive to businesses, and that means lowering taxes. Cutting tax rates increases tax revenues—something Arthur Laffer discovered.

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No More Taxachusetts?

Posted on December 2, 2007 by Russ

I have a few clients in Massachusetts. We joke that it’s really “Taxachusetts.” Massachusetts’ state income tax is 5.3%, and is really more of a gross receipts income tax; few deductions are allowed. But that may change.

Citizens in Massachusetts have collected over 66,000 signatures on petitions—the first step in a drive to eliminate the state’s income tax. While there are more steps involved in the process (including collecting a second set of 11,000 signatures early next year), it’s likely that residents of the Commonwealth will have a chance to vote themselves out of the state’s income tax.

It may be a very interesting election cycle in Massachusetts. Although, as the link notes, expect lots of politicians to say, “The sky is falling.”

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Hudec Pleads Guilty

Posted on December 2, 2007 by Russ

Earlier this year I wrote about Richard Hudec, Jr. Mr. Hudec had been accused of tax evasion and concealing material information. He pleaded guilty to those charges on Friday. While he faces up to ten years at ClubFed it’s likely he’ll receive about 3 years. First, though, he must testify against a co-defendant under his plea deal. Sentencing is scheduled for next February.

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I Thinking I’m Getting Sick…

Posted on December 2, 2007 by Russ

What does the IRS have to do with health care? Very little today. However, if one presidential candidate gets his wish, the IRS will be intimately involved in health care.

Former Senator John Edwards (D-NC) proposes that under his version of socialized medicine, Americans would have to submit proof of health insurance with their annual tax filings. If you didn’t have insurance, the IRS would notify a newly created federal/regional bureaucracy; that individual would be required to obtain insurance (but would get a tax credit to help with his payments).

Now, I’ve probably got some of the details garbled, but I’m not apologizing for that. The IRS has enough difficulties administering taxes. Getting them involved in health care is a prescription for a headache that we’d all be sharing.

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