Phish Got to Swim….

Posted on March 14, 2006 by Russ

A couple of weeks ago, I noted that phishers have started targeting people by claiming that you can receive a small tax refund. Just click on their link (to a phony IRS website), give out your information, and we’ll get you $82.58 or some other small sum. In Tuesday’s Wall Street Journal (paid subscription required), there’s yet another article about this scam.

The IRS does not send out emails to taxpayers. The IRS website does have a tool to find where your refund is (you need your social security number, filing status, and the exact amount of your refund).

Remember, if it sounds too good to be true, it probably is.

Posted in IRS | Comments Off on Phish Got to Swim….

Increase Casino Tax Rates Or Increase Casinos?

Posted on March 13, 2006 by Russ

That was the decision Iowa was faced with after the Iowa Supreme Court ruled that tax rates at race track (horse racing) casinos were unconstitutional in 2004. Today, Iowa is in the midst of a casino building boom, with four new casinos opening and many existing casinos undergoing renovations.

Of course, legislators when faced with a tax shortfall (or a tax being declared illegal/unconstitutional) try for some other means of raising the same revenues. Perhaps we can call it a “user fee.” Maybe some video lottery terminals will raise some money. Or let’s just add some casinos. I mean, can we actually consider cutting spending? Of course not.

The beneficiaries of this policy are obvious: the casinos, Indian tribes operating some casinos, the State of Iowa (those tax revenues are still flowing), and in one sense, the gamblers in Iowa. After all, with the renovations and new facilities, it’s easier to gamble and it’s more comfortable (or soon will be).

Of course, it’s hard to win in most gambling, as the odds are with the house. You could try playing poker (several casinos in Iowa offer real poker). I’d advise reading a book first (shameless self promotion: I’m the co-author of a book on no-limit hold’em), as most poker players are losers.

So what’s the moral of the story? In most jurisdictions, government will find a way to make sure those tax revenues keep coming in.


News Story: Des Moines Register

Iowa Supreme Court Decision
Roth Tax Updates Story on Iowa Supreme Court Decision

Posted in Gambling, Iowa | Comments Off on Increase Casino Tax Rates Or Increase Casinos?

Atlanta’s Ex-Mayor Convicted of Tax Evasion, Acquitted of RICO Violation

Posted on March 11, 2006 by Russ

William Campbell, the former mayor of Atlanta, was convicted yesterday of three counts of tax evasion but acquitted on the more serious RICO (Racketeer Influenced and Corrupt Organizations Act) charges.

The trial ended a seven-year investigation of corruption in Atlanta city government. Ten people were convicted through the investigation. Campbell’s attorney noted, “We knew there were some technical violations of the tax code. They’re serious, but we’re going to be O.K.” Campbell faces up to nine years in jail and $300,000 in fines but will likely face jail time of 2-3 years.

News Story: New York Times

Posted in Tax Evasion | Tagged | 4 Comments

There’s Corruption in New Jersey? I’m Shocked!

Posted on March 10, 2006 by Russ

Well, not really.

>From the Newark Star-Ledger comes word that the New Jersey Director of Taxation, Robert Thompson, Deputy Director Harold Fox (no relation), and Assistant Director for Compliance David Gavin have been suspended. The New Jersey Commission of Investigation alleges that the three received gifts from OSI Collection Services. Governor Jon Corzine ordered the expedited ethics investigation. The three were suspended with pay.

The Commission report alleges that the three were wined, dined, taken to spas, Broadway shows, and on golf trips. The report also alleges that the three allowed OSI to overbill New Jersey by $1 million. OSI collected delinquent taxes for the state on an outsourcing contract. The contract expired at the end of February and was not renewed.

News Story: Newark Star-Ledger

Posted in New Jersey | 1 Comment

California LLC Gross Receipts Tax Unconstitutional But…

Posted on March 9, 2006 by Russ

And it’s a big but.

Thanks to the TaxProfBlog and Roth Tax Updates for giving me the tip on a case decided in San Francisco, Northwest Energetic Services v. Franchise Tax Board. Northwest, a Washington State LLC, sued to recover its LLC Gross Receipts Tax, er, Levy, from the Franchise Tax Board. Northwest had no operations in California, but was registered in the state. The court ruled that the levy is really a tax and that because the tax, er, levy was based on unapportioned income, it violated the due process and interstate commerce clauses of the Constitution.

As Joe Kristan (Roth Tax Updates) notes, the FTB will appeal.

In any case, as I read the decision, the levy (tax) is legal for a California based business with all of its income derived from California. Indeed, if the gross receipts levy is modified so that it is based on an apportionment (similar to Schedule R used on California corporate tax returns), then it would be legal.

If you are a member of an LLC, make sure that your LLC applies for a refund. California has a four-year statute of limitations on refunds (given timely filing); your refund request for tax years 2001 needs to be postmarked by April 15th (certified mail, return receipt requested, of course).

Given that California is still in dire financial straits, don’t expect anything to change. Remember that the California LLC code prohibits professionals from being a member of an LLC in the state. Also remember that this decision will be appealed, and, as Joe Kristan notes, you should continue to pay your LLC levy, er, tax for the foreseeable future.

Hat Tips: TaxProf Blog, Roth Tax Updates

Posted in California | 5 Comments

Shades of Western Tax Service

Posted on March 7, 2006 by Russ

In Maryland, a certified accountant was arrested on tax fraud charges. Allegedly, he inflated deductions, and inflated his tax preparation charges. He apparently used some of the $300,000 his scheme raised to buy property.

Story: Baltimore Sun

Posted in Tax Fraud | 1 Comment

Vote Early and Often, Redux

Posted on March 4, 2006 by Russ

For those of you (like me) who voted last December in the election to replace Chris Cox as Congressman, it’s just about time to vote on his replacement. John Campbell was the State Senator for the 35th District (Irvine and surrounding cities). On April 11th, we will vote in a special election for his replacement.

The Orange County Registrar’s home page on the election is here. The district is overwhelmingly Republican; there are two Republican candidates in the primary: Diane Harkey and Tom Harman. If no candidate receives 50% of the vote plus one, there will be a run-off election held in conjunction with the State Primary Election on June 6th.

Posted in California | Comments Off on Vote Early and Often, Redux

State Senate Majority Leader Drops Support for Prop. 82

Posted on March 3, 2006 by Russ

According to the San Francisco Chronicle, State Senator Don Perata (D-Oakland) has dropped his support of Rob Reiner’s Proposition 82, the mandatory preschool/increase income tax/Help Arizona, Nevada, and Colorado Initiative, because it was too expensive. Perata noted that the estimated cost per child (under Proposition 82) would be over $8,000 (for a half-day); this is larger than the per-student cost for a full day of school at some elementary schools in California.

Perata was also troubled by the year-end advertising campaign that First Five mounted, noting “That was over the line. A blatant effort to promote the initiative.” There have been calls in the state legislature for audits of First Five.

News Story: San Francisco Chronicle

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Spend the $4.50….

Posted on March 2, 2006 by Russ

When I send out a tax return to a client, and it has to be mailed to a tax agency, I always state, in my letter, “mail, using certified mail, return receipt requested….” Joe Kristan of Roth Tax Updates today reported on a court case that made its way to the Iowa Supreme Court. A taxpayer’s refund was denied because he couldn’t prove it had been mailed in on a timely basis. Apparently, the accountant mailed the return for the taxpayer…but using just first class mail.

Joe Kristan’s advice at the end of his post is the same advice we’ve been giving out for years:

“The Moral? Go to the post office, use certified mail, return receipt requested, and save the postmark receipt and return receipt in a safe place. Better yet, use electronic filing and save the whole runaround.” If you’re going to spend money having a professional prepare your return (and it’s a lot more than $4.50), spend the $4.50 to mail your return!

Hat Tip: Roth Tax Updates

Posted in IRS | Comments Off on Spend the $4.50….

Another Hobby Loss

Posted on March 1, 2006 by Russ

In a recent unpublished opinion, the Eighth Circuit looked at a hobby loss case, Montagne v. Commissioner. One of the points we continually make is to document, document, document. The Montagnes had a horse-breeding “business,” but the Tax Court ruled that it was a hobby. The Eighth Circuit noted that there was no financial projections or business plan, and that they co-mingled their business and personal expenses (one bank account). So if you’re going to have a business, treat it that way: maintain separate records and a separate bank account.

Case: Montagne v. Commissioner, 04-4137

Posted in Tax Court | Comments Off on Another Hobby Loss