You’ll be happy to know that the IRS is closing 68 Taxpayer Assistance Centers (TACs) as “…part of the agency’s continuing efforts to create efficiencies, modernize operations, and reduce costs while maintaining [our] commitment to public service.”
Of course, as mentioned previously, the real reason is a 1% budget cutback. The IRS’s criteria used to choose the 68 TACs to be closed can be found here.
…But the Tax Court does.
In a case released today, a man thinks he has some additional 1099s. He has not received copies of his statements on these accounts (they are education accounts for his children). He calls and writes his bank, and asks for copies. He calls and write his ex-spouse, asking for copies. His bank acknowledges the request, but never sends any 1099s (or statements). His ex won’t give him the time of day. He assumes there aren’t any additional 1099s and files his return.
However, the IRS examines his return and finds the “missing” 1099s. He immediately pays the additional tax, but he’s also assessed an accuracy-related penalty because the amounts were large. He goes to Tax Court and challenges the penalty.
I don’t think it’s a close case. As the Court notes,
We note at the outset that we found petitioner to be a very conscientious taxpayer. In preparing to file his 2000 return, petitioner made concerted efforts to obtain any statements and Forms 1099 pertaining to the education accounts….Moreover, petitioner specifically requested that First Albany mail him copies of the Forms 1099 pertaining to the education accounts….Petitioner never received any Forms 1099 for 2000 from First Albany pertaining to the education accounts. It was not unreasonable for petitioner to assume that there were no Forms 1099 issued….
Upon a review of the record, we find that petitioner had reasonable cause to believe that there were no Forms 1099 pertaining to him, and that he acted in good faith with respect to the understatement attributable to the income reported on those forms.
One should note, though, that the Court notes, “Although this is a close case….” The taxpayer does all that he can do and it’s close? Just a reminder of where the bar is in Tax Court.
…in jail.
After having been gone for just under a week, I must thank Roth Tax Updates for the first of a few gems. It seems that Lynne Meredith received 121 months (10 years and a month) for conspiring to defraud the IRS. The Los Angeles Times details the story here (one-time registration required). In her book, How to Cook a Vulture, she stated that she could show people how to get the IRS to write you a letter that you didn’t have to pay taxes.
It didn’t work.
But Ms. Meredith won’t have to pay taxes in upcoming years. She’ll be making sub-minimum wage in a Federal penitentiary.
Unless you’ve been hiding out, you’ve almost certainly heard the news that the US Supreme Court yesterday overturned the conviction of Arthur Andersen for destroying documents in the Enron fiasco. You can find news coverage here and here (one-time registration required). The opinion can be found here.
What does this mean? Arthur Andersen (the accounting firm) no longer exists; instead of a Big Five accounting firms we have a Big Four. Will Arthur Andersen rise from the dead? That’s just not going to happen. Will the US retry Andersen? I have no idea, but it’s irrelevant. Andersen is dead.
As the Wall Street Journal points out in an editorial today, going after the partners would have been a better idea. Most of the employees of Andersen had no idea of what was going on. Does anyone really believe that a tax partner in Seattle knew what the partners in Houston were doing? It was guilt by association. At least the US Justice Department has apparently learned from this. In recent white-collar cases, the Justice Department has gone after the principals.
Let’s assume you (erroneously) believe that the US has no write to levy an income tax on you. You are a believer in one of the many frivolous or groundless schemes that say, in short, that the US can’t levy an income tax. (For a good rejoinder on most of these, take a look at the Tax Protester FAQ.)
The Tax Court doesn’t appreciate such arguments. They’ve heard them all (or almost all) and have said,
“…arguments that this Court has repeatedly found to be frivolous and/or groundless, see, e.g., Copeland v. Commissioner, T.C. Memo. 2003-46; Smith v. Commissioner, T.C. Memo. 2003-45, and we find this also to be true in this case. See also Holliday v. Commissioner, T.C. Memo. 2002-67, affd. 57 Fed. Appx. 774 (9th Cir. 2003).”
In this case, the petitioner filed returns with $0 income and $0 tax. The IRS filed substitute returns and then started action to place tax liens on various assets.
The conclusion? The Tax Court put it well,
“Petitioner’s meritless arguments support the conclusion that remanding this matter to respondent’s Appeals Office for recording would be neither necessary nor productive, and we so hold.
“We have considered all of petitioner’s contentions and arguments that we have not discussed, and we find them to be without merit and irrelevant.
“Further, we hold that respondent correctly determined that
collection efforts should proceed.”
Ok, what does that have to do with tax?
That’s what I was thinking when I read this article (one-time registration required). Restaurateur Neil Stein plead guilty yesterday to federal tax fraud charges and will likely receive a term of 12 to 30 months in prison.
Mr. Stein apparently skimmed upwards of $450,000 from his restaurants (including Rouge and Bleu) while reporting just over $100,000 in salary. Unfortunately, spending $65,000 on his daughter’s wedding while earning just over $100,000 made his conspicuous consumption just a bit too visible.
As to the quote, that’s right from the article. While Mr. Stein may now be clean from drugs and alcohol, he’ll apparently have some free time on his hands to contemplate the past.
Lurching its’ way through the Legislature is SB757, introduced by Christine Kehoe (D-San Diego). The bill has an innocuous title, “The Oil Conservation, Efficiency, and Alternative Fuels Act.” It is an efficient bill—if passed, this analysis indicates that 80,000 jobs would leave California. Luckily, the Governator is likely to veto this legislation.
As the analysis (an article in the San Jose Business Journal) notes, just a few years ago a similar piece of legislation passed the Legislature. The one difference between the two bills is that the prior bill required a study. Both want a 15% reduction in fuel consumption. The study showed that any of the following could cause such a reduction:
– A $0.50/gallon increase in the gasoline tax
– Pay at the pump auto insurance, at $0.48/gallon
– A $0.02/mile driven tax
– A $3500/purchase tax on SUVs, mini-vans, and trucks
The bill is about to reach the Senate floor. If you’re a Californian, tell your State Senator how you feel about the bill. Indeed, a look at the analysis provided by the Office of Senate Floor Analysis, including the list of supporting organizations (8), and the list of organizations in opposition (22), show that the usual suspects (Sierra Club, etc.) support the bill while business, agricultural, and taxpayer groups are against the bill.
In the June (2005) issue of the Journal of Accountancy, Eva Lang wrote an article entitled “Would You, Could You, Should You Blog?” The article gives good background if you’re considering starting a blog. Unfortunately, Ms. Lang gets my credential wrong (I’m an EA, not a CPA) but that’s the only blemish in an otherwise excellent article.
According to a report in the Tax Analyst, the IRS will close some taxpayer assistance offices. The Wall Street Journal reported that 70 offices will be closed in order to handle a 1% drop in funding for taxpayer assistance. Unfortunately, that will drive more taxpayers to call the IRS where there is a 50% chance you will get a correct answer to your question.
In the same article in the Tax Analysts, IRS Commissioner Mark Everson notes that he’d like to see any firm that sends tax work overseas be required to notify taxpayers of that fact. It is unclear, though, whether the IRS has the power to make such a disclosure regulation.
In eWeek Magazine, the Florida Department of Revenue’s (FDOR) computer system, “SUNTAX,” is highlighted. The system is modern, integrated, and allows FDOR agents to quickly access records across the system. By all accounts, a successful project that replaced several antiquated systems. You can find the article here. (Note: Article is on page 34 of the pdf file—the file is the entire May 23rd issue.)
On the other hand, there’s California’s Franchise Tax Board (FTB). Now, some of the systems of the FTB are integrated; however, many are not. As I previously wrote in “Bad Paperwork from the FTB”, I received a notice requiring my company to enroll in California’s electronic payment system because estimated tax payments from my company have exceeded $20,000 or total tax liability exceeded $80,000. There is only one problem: Neither occurred.
So I telephoned the EPS office. They directed me to the payments office. When I finally spoke to someone who could access the cause of the problem, it appears that someone made a tax deposit into “my account” of over $200,000! When I explained that it wasn’t me, they promised to get back to me.
Yesterday, I heard back from EPS. They agree that I probably didn’t make the deposit and that my company need not enroll in EPS. ($200,000 of taxes is quite a bit more than what my company pays in annual California taxes.) But they couldn’t figure out who made the deposit.
The good news is that the two departments within FTB talk to each other. The bad news is that they don’t have access to all the records that they should.
