Monday, September 21, 2009


BUZZ. BUZZ. The BUZZ is back!

I hope you enjoyed my series of “Totally 1040 Free” posts last week. Minimal comments were received – doesn’t anyone else have something to say about my thoughts on reality tv and movies?

* Trish McIntire ended the week before last with a great post at OUR TAXING TIMES appropriately titled “Legislative Spam”. In it she provides a list of questions that she has regarding the recently proposed “"Humanity and Pets Partnered Through the Years (HAPPY) Act”, which I had referenced in an earlier BUZZ entry.

But the true “meat” of the post is in her final paragraph (highlights are mine) -

“I am sure more questions will pop into my head but I think I have made my point. The idea of a pet deduction is a fun diversion on a dreary Friday afternoon but it highlights a major problem with the US Tax Code. Congress and the Executive branch, both sides, have for too long used the tax code to reward, punish or encourage the behavior of individuals and businesses. The tax code should fairly raise money to run the country. It's nice to be assured of job security as taxpayers need help getting through the tax maze. However, the US has some major issues to deal with and bills such as this waste the time and resources. They are nothing more than Legislative Spam.”

* It seems that everybody and their brother blogged, wrote or commented about the tax advice given to a filmmaker and friend posing as a pimp and prostitute by ACORN. Perhaps the best post was “ACORN Officials Offer Tax Advice (and a Word or Two About Being a Pimp)” by TAX GIRL Kelly Phillips Erb.

I like Jay Leno’s comment on the situation –

ACORN is an organization that gets government money to help poor people. Well, now they’re in trouble. These two film-makers went to ACORN posing as a pimp and prostitute saying they wanted to buy a house and run it as a brothel. ACORN gave them advice on how to do it and how to avoid prosecution and how to avoid paying taxes. If they want to get away with prostitution and not paying taxes, they should go to Congress. These are the professionals.”

* Responding to TAX GIRL Kelly Phillips Erb’s post on the ACORN disaster, Jean Murray provides some ways to check out a potential tax preparer and how to spot bad advice in her post “Don't Get Tax Advice from These Folks!” at JEAN’S BUSINESS LAW/TAXES: US BLOG.

* In light of all the talk about the ACORN tax advice, here is an interesting Tax Court case, discussed in the post “Costs of Prostitutes and Pornographic Magazines Not Medical Expenses” at G. Christopher Wright’s THE TAX LAW REPORT blog.

I wonder if the decision would have been any different, at least for the pornographic materials, if the “treatment” had been prescribed by a doctor. Like medical marijuana, the services of a prostitute would still have been disallowed as being illegal.

* It seems that the retired tax lawyer who claimed a ton of deductions for prostitutes and porno is not going to take the Tax Court’s decision lying down! Check out “Tax Lawyer Fights Rulings Barring Deduction For Prostitutes: William Halby insists the U.S. Constitution protects sex-for-pay write-offs” at FORBES.COM.

* JOE TAXPAYER provides a good overview of “Inheriting or Bequeathing an IRA”.

* Before heading off to recuperate I got an email from TIGTA with the headline “NEW TIGTA AUDIT ENCOURAGES MANDATORY E-FILING BY PREPARERS”. The email referred to a recent TIGTA report.

The email stated -

The Treasury Inspector General for Tax Administration (TIGTA) today publicly released an audit report recommending that the Internal Revenue Service (IRS) seek mandatory e-filing of individual tax returns prepared by paid preparers.

TIGTA also recommended that IRS use readily-available scanning technology to convert paper returns into electronic files. The IRS employs up to 5,000 individuals during filing season to enter data from individual tax returns into its database

In response the IRS “told TIGTA that it is seeking legislative authority from Congress for mandatory preparer e-filing as part of its Fiscal Year 2010 budget request.”

Will the legislation read that all tax preparers “who use tax preparation software” must e-file (like the New York State law reads) or will it authorize the IRS to provide a free online system for e-filing, similar to NJWebFile, or will it provide free downloadable e-filing software? If tax preparers are required to e-file then the process by which to do so must be made available free of charge. The government should not force me to spend thousands of dollars for otherwise unnecessary tax preparation software.

* Kay Bell began a new blog series at DON’T MESS WITH TAXES – Third Tuesday Tax Tweets (aka T4). She introduced and explained the series in the post “Welcome to Tax Twitter Tuesday”.

* PHILLY.COM reports in “A Pennsylvania Tax Idea Goes Up In Smoke” that the new PA state budget proposal includes a 25-cent-per-pack hike in the cigarette tax. Yet “still no tax on smokeless tobacco or cigars”.

Why? “Because the majority of people negotiating the budget are cigar-chomping men," says Johnna Pro, press secretary for the House Majority Appropriations Committee.

I am truly glad that PA did not add a tax on cigars. The first stop I made on my visit to PA this past week-end (and on every visit) was the local Tobacco Road shop to stock up on cigars.

* A client recently asked me if I thought the First-Time Homebuyer Credit (of up to $8,000), a fully refundable credit, would be extended. It currently expires on November 30th – so you must close by November 30th to be able to qualify for the credit. I said I did not think so, and advised that one should not act based on the assumption that it will.

However, a BLOOMBERG.COM item, titled “Homebuyer Tax-Credit Extension Gains Lawmaker Support (Update1)”, suggests that there is growing support for extension of the credit. It points out - “Realtors, bankers and homebuilders have joined in the push, starting a campaign that encourages Congress to extend the program for one year with the tag line: ‘Don’t Let America’s Real Estate Recovery Expire’”.

* I totally agree with Michael Rozbruch of the TAX RESOLUTION UNIVERSITY blog when he says “Filing a Delinquent Tax Return is Better Than Failure to File Taxes”.

* Right on to USA for the September 16th editorial “Merrill Bonus Case Highlights How Shareholders Get Fleeced”.

The editorial was about the action taken by the SEC in response to this situation –

Last year, for their skill at losing $27 billion and driving a storied 94-year-old securities firm to the brink of ruin, Merrill Lynch executives decided it was time to reward themselves and thousands of other employees with up to $5.8 billion in bonuses. Then, when Bank of America bought Merrill Lynch, it got shareholder approval for the purchase without bothering to share information about the bonuses.”

The editorial makes the following comments –

The reality is that until executives, directors, attorneys and accountants know that they can be held financially liable as individuals, the government won't have much more success than shareholders in promoting better behavior. Whatever efforts regulators can muster can be deflected with legal fees and minor fines, also borne by shareholders.
It's not unlike the way some mining companies, airlines and toy companies deal with safety issues. They see it as more cost effective to simply pay for violations than to actually comply with the regulations. After all, why play by the rules when, if you get caught, you can use other people's money to make the problem go away?


1 comment:

JoeTaxpayer said...

I appreciate the link above to my Inheriting an IRA post.
Much thanks,