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Democrats pull tax cheat bill - The benefits of being a government employee just keep on growing. It seems that, in addition to the higher pay and job security than in the private sector, government employees are allowed to shirk their tax paying responsibilities with complete impunity.
Camel's nose under the tent...
Proving that the PRC isn't the only Left Coast state run by Marxist idiots, one of the few states without a personal income tax is so desperate for cash that they are proposing this soak the rich scheme.
Anyone with any knowledge of history, especially of the US Tax Code, knows where this will end up. It won't be long before an income tax only intended for the evil rich will be assessed on everyone.
New Tax Credit to Incentivize Business to ‘Make Profit’ - This parody from Scott Ott wouldn't be so appropriate if our entire capitalist system weren't under such an intense assault from the Marxist DemonRats in DC.
Rat out a tax cheat, collect a reward - Interesting piece on how to fink on others.
IRS Interest Rates
Four (4) percent for overpayments [three (3) percent in the case of a corporation];
Four (4) percent for underpayments;
Six (6) percent for large corporate underpayments; and
One and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.
Refusing to bend over...
Montgomery sees huge decline in taxable income – It's always great to see when State rulers are slapped in the face with the real world fact that people in their cross-hairs for punitive taxation don't just bend over and accept it; but move to lower tax jurisdictions. States that think they can solve their fiscal blunders by sticking it even more to the “evil rich” will suffer the same consequences.
More IOUs for TaxPayers
Cash-Strapped States Delay Tax Refunds; NY Says It's an Option - As always, crazy ideas hatched in the PRC have a way of spreading across the country.
Just try sending an IOU payable to your State in with your State tax return and count the days before your bank account is levied.
Class Warfare's Next Target: 401(k) Savings - Raiding private retirement accounts, either with an upfront tax or as a conversion to government control, has been under consideration by our rulers in DC for a while now; at least since the Clinton years. That huge pool of wealth is simply too tempting for our money and power hungry rulers to resist.
This is also another example of how our rulers have no shame about changing the rules after the fact in regard to retirement plans, as I have explained on countless occasions when warning about Roth IRAs. How can anyone seriously feel safe about Roths remaining tax free for much longer, when our out of control rulers are openly contemplating a full scale confiscation of private retirement funds?
Insane Tax Protest
The nut job who "got even" this morning with the IRS in Austin for the results of an audit had published a ranting semi-explanation of why he took this drastic step; but it was taken down by his web hosting company. The Smoking Gun was able to snag a copy of it prior to its removal, and has it posted here.
From this passage on the fifth page, it sounds like his CPA, Bill Ross, should be very careful and on the lookout for booby traps, such as car bombs and suspicious packages in the mail. Any current tax clients of his should also be careful not to get caught in the crossfire from this dispute.
Comparing Ponzi Schemes
Neal Boortz recently posted this side by side comparison of the two largest Ponzi schemes used to steal investor money in this country.
Another big difference between the two schemes was the fact that Madoff's victims invested their money voluntarily, while Social Security is funded at the point of a gun. Madoff's investors stopped giving him their money as soon as it was revealed to be a fraud. IRS is still forcing people to pay in to the SSA even now that's its collapse has been revealed to be imminent.
From the most recent issue of Accounting Today that arrived in today's snail mail.
Desperate For Money
Like drug addicts craving their next fix, politicians will stoop to any means to squeeze more money out of the little people in order to feed their out of control spending addiction, as with this story from New York that will be duplicated all over the country..
Debunking Tax Protestors
Long time readers know that one of my long running pet peeves is having to waste time debunking ridiculous theories espoused by tax protestors. For a long time, I felt like I was doing the IRS’s job because they refused to even acknowledge publicly that those arguments were floating around under the completely mistaken belief that to even mention them would in some way legitimize them. The promoters of those arguments used the IRS’s silence as an endorsement of their arguments.
Finally, after decades of ignoring the idiotic arguments used by tax protestors to convince others that they don’t need to file tax returns, IRS has been taking a more pro-active approach. They have recently updated their guide to most of these bogus claims, entitled The Truth about Frivolous Tax Arguments.
IRS Press Release – IRS Debunks Frivolous Tax Arguments
The table of contents below gives us a good idea of the growth in this segment of our society, as there have obviously been enough stupid people advocating these ridiculous theories to earn a spot on this list of morons.
THE TRUTH ABOUT FRIVOLOUS TAX ARGUMENTS
January 1, 2010
I. FRIVOLOUS TAX ARGUMENTS IN GENERAL
A. The Voluntary Nature of the Federal Income Tax System
1. Contention: The filing of a tax return is voluntary
2. Contention: Payment of tax is voluntary
3. Contention: Taxpayers can reduce their federal income tax liability by filing a “zero return.”
4. Contention: The IRS must prepare federal tax returns for a person who fails to file.
5. Contention: Compliance with an administrative summons issued by the IRS is voluntary.
B. The Meaning of Income: Taxable Income and Gross Income
1. Contention: Wages, tips, and other compensation received for personal services are not income.
2. Contention: Only foreign-source income is taxable.
3. Contention: Federal Reserve Notes are not income.
C. The Meaning of Certain Terms Used in the Internal Revenue Code
1. Contention: Taxpayer is not a “citizen” of the United States, thus not subject to the federal income tax laws.
2. Contention: The “United States” consists only of the District of Columbia, federal territories, and federal enclaves.
3. Contention: Taxpayer is not a “person” as defined by the Internal Revenue Code, thus is not subject to the federal income tax laws.
4. Contention: The only “employees” subject to federal income tax are employees of the federal government.
D. Constitutional Amendment Claims
1. Contention: Taxpayers can refuse to pay income taxes on religious or moral grounds by invoking the First Amendment.
2. Contention: Federal income taxes constitute a “taking” of property without due process of law, violating the Fifth Amendment.
3. Contention: Taxpayers do not have to file returns or provide financial information because of the protection against self-incrimination found in the Fifth Amendment.
4. Contention: Compelled compliance with the federal income tax laws is a form of servitude in violation of the Thirteenth Amendment.
5. Contention: The Sixteenth Amendment to the United States Constitution was not properly ratified, thus the federal income tax laws are unconstitutional.
6. Contention: The Sixteenth Amendment does not authorize a direct nonapportioned federal income tax on United States citizens.
E. Fictional Legal Bases
1. Contention: The Internal Revenue Service is not an agency of the United States.
2. Contention: Taxpayers are not required to file a federal income tax return, because the instructions and regulations associated with the Form 1040 do not display an OMB control number as required by the Paperwork Reduction Act.38
3. Contention: African Americans can claim a special tax credit as reparations for slavery and other oppressive treatment.
4. Contention: Taxpayers are entitled to a refund of the Social Security taxes paid over their lifetime.
5. Contention: An “untaxing” package or trust provides a way of legally and permanently avoiding the obligation to file federal income tax returns and pay federal income taxes.
6. Contention: A “corporation sole” can be established and used for the purpose of avoiding federal income taxes.
7. Contention: Taxpayers who did not purchase and use fuel for an off-highway business can claim the fuels tax credit.
8. Contention: A Form 1099-OID can be used as a debt payment option or the form or a purported financial instrument may be used to obtain money from the Treasury.
II. FRIVOLOUS ARGUMENTS IN COLLECTION DUE PROCESS CASES.
A. Invalidity of the Assessment.
1. Contention: A tax assessment is invalid because the taxpayer did not get a copy of the Form 23C, the Form 23C was not personally signed by the Secretary of the Treasury, or Form 23C is not a valid record of assessment.
2. Contention: A tax assessment is invalid because the assessment was made from a substitute for return prepared pursuant to section 6020(b), which is not a valid return.
B. Invalidity of the Statutory Notice of Deficiency.
1. Contention: A statutory notice of deficiency is invalid because it was not signed by the Secretary of the Treasury or by someone with delegated authority.
2. Contention: A statutory notice of deficiency is invalid because the taxpayer did not file an income tax return.
C. Invalidity of Notice of Federal Tax Lien
1. Contention: A notice of federal tax lien is invalid because it is unsigned or not signed by the Secretary of the Treasury, or because it was filed by someone without delegated authority.
2. Contention: The form or content of a notice of federal tax lien is controlled by or subject to a state or local law, and a notice of federal tax lien that does not comply in form or content with a state or local law is invalid.
D. Invalidity of Collection Due Process Notice
1. Contention: A collection due process notice (Letter 1058, LT-11 or Letter 3172) is invalid because it is not signed by the Secretary or his delegate.
2. Contention: A collection due process notice is invalid because no certificate of assessment is attached.
E. Verification Given as Required by I.R.C. § 6330(c)(1)
1. Contention: Verification requires the production of certain documents.
F. Invalidity of Statutory Notice and Demand
1. Contention: No notice and demand, as required by I.R.C. § 6303, was ever received by taxpayer.
2. Contention: A notice and demand is invalid because it is not signed, it is not on the correct form (such as Form 17), or because no certificate of assessment is attached.
G. Tax Court Authority
1. Contention: The Tax Court does not have the authority to decide legal issues.
H. Challenges to the Authority of IRS Employees.
1. Contention: Revenue Officers are not authorized to seize property in satisfaction of unpaid taxes.
2. Contention: IRS employees lack credentials. For example, they have no pocket commission or the wrong color identification badge.
I. Use of Unauthorized Representatives.
1. Contention: Taxpayers are entitled to be represented at hearings, such as collection due process hearings, and in court, by persons without valid powers of attorney.
J. No Authorization Under I.R.C. § 7401 to Bring Action.
1. Contention: The Secretary has not authorized an action for the collection of taxes and penalties or the Attorney General has not directed an action be commenced for the collection of taxes and penalties.
III. PENALTIES FOR PURSUING FRIVOLOUS TAX ARGUMENTS
Rush also picked up on the Drudge item about IRS purchasing a bunch of new shotguns. He had this to say about the topic, as transcribed on his website.
Look at this: "The IRS Is Looking For 60 12-Gauge Pump Action Guns To Arm Its Investigators." This is from BusinessInsider.com. "Working for the IRS doesn't sound so wimpy anymore. The IRS apparently has plans to buy 60 Remington Model 870 police 12 gauge pump action shotguns for the Criminal Investigation Unit. According to the federal business government website, these guns are serious. The Remington parkerized shotguns come fully loaded with:
A fourteen inch barrel
Wilson Combat Ghost Ring rear sight
XS4 Contour Bead front sight
Knoxx Reduced Recoil Adjustable Stock
Speedfeed ribbed black forend
"We're not sure what kind of IRS duty requires this kind of combat artillery, but it sounds badass. And oddly, these are the only guns the IRS is allowed to use, 'based on compatibility with IRS existing shotgun inventory.'" (interruption) No, I don't think this is for Geithner. You mean to get him to repay? You know, I'll tell you what, with as much as they're going to raise taxes they're going to have to be a big problem. It won't be long before they bring the military in to do this. Sixty 12-gauge pump action shotguns for the IRS?
Next in Line for a Bailout: Social Security – All Ponzi schemes eventually collapse on their own.
Drudge had some interesting tax related stories in today’s headlines:
Case backs need for sex-change surgery. US tax court rules costs deductible – A new more generous interpretation of the dispute between “required” medical costs and “elective,”
Budget-strapped states avoid the word 'taxes.' Rise disguised as penalty, fee. - This trick has long been used by slimy politicians to pretend they aren’t raising taxes, while using various other means to steal money from us peons.
Acquiring Shotguns – This bid by IRS to purchase 60 shotguns illustrates that I haven’t been exaggerating when I say that we are forced to pay taxes and for the Social Security Ponzi scheme at the point of a gun. It’s also another example of how “voluntary” paying taxes is, for those idiot tax protestors still clinging to that stupid argument.
Expiring tax breaks
Unfortunately, it is much more likely that the DemonRats in DC will let Bush’s tax cuts expire, resulting in huge tax increases for everyone.
IOUs From IRS?
I must admit that I hadn’t heard this rumor that Snopes.com debunks regarding all 2009 Federal tax refunds being in the form of US Savings bonds. However, after last year’s ridiculous situation in the PRC, where they did actually issue IOUs in place of refunds for state income tax refunds, it would be a natural progression to think that this nutty idea would be used by the IRS and our imperial rulers in DC.
For better and usually worse, there is a long history of California starting ludicrous tends that soon become national. Who knows? If the Chi-Coms refuse to loan us more money, it could very easily evolve into mandatory loans from the taxpayers. Again, as I’ve mentioned before, the PRC has been doing a similar thing with mandatory over-withholding of taxes from employees as a means of extracting interest free loans from them.
The Meaning of Life - This Time of Year
Prospects of Tax Hikes In the Near Future?
Democratic Tax Dissent. Not everyone wants the Bush tax rates to expire. – The ridiculous use of the expiration date for the Bush tax cuts is still a ticking time bomb that will result in a humongous tax increase if they are not extended or made permanent by our imperial rulers in DC.
Voting for Higher Taxes. The real takeaway from Oregon’s recent referendum. – Proving once again that the Left Coast isn’t just California in regard to supporting suicidal Marxist policies.
New 1040 Mailing Addresses For Some People
Taxpayers in Nine States and the District of Columbia File with Different Centers this Year – IRS’s annual re-shuffling of the Service Centers. The annoying thing is that, although our tax software usually gets this right for the current tax year, the previous years programs are still set up for the old Service Centers, so we need to remember to manually over-ride them.
This latest change affects taxpayers currently living in the following states:
District of Columbia
Remember, it’s where you live when you are filing the tax return that matters; not where you were living during the tax year of the 1040.
Building an Accounting Practice
Subject: Accounting Business Question
Mr. Kerstetter,I read some of your blog posts by reading up on tax strategies on the internet and found your blog and posts very informative and interesting to read through. My question is less accounting based than many of your other readers.I guess a little background might help first, I am a single dad and currently a CPA who was a financial auditor in my former life. Not even a year after I received my Masters in Accounting I found myself at the brunt of a fairly awesome child support dispute at the worst time possible (due to the state of our economy), it effected my work product and I lost my job. I decided not to waste my education and find a way to begin my own accounting business providing bookkeeping and tax services.Long story short I was able to mediate a successful workable support agreement with the mother which will allow me to move to Nashville to be close to my son and to attend a night law school to bolster my legal and tax background so that I will be able to offer additional services in the future and potentially save my a** in case I encounter any additional legal troubles in the future (I was not prepared for how fathers are treated in family court).Anyway, In the mean time I will begin the slow task of acquiring new clients in Nashville. My question is this, can you give me any good tips on how to attract clients. I use TaxACT as my tax software and have began familiarizing myself with Quickbooks Accountant and Pro. I have a few clients but they were acquired simply by luck almost. I have a basic fee structure but how do I know if this is competitive or if I'm under/over charging, I was used to billing myself out at $200 an hour at BDO Seidman but that seems a bit much for a new CPA on the block plus it was audit work. If you know of any good books I could read or could offer any advice I would be more than appreciative. Also, how did you go about getting your own domain address for your email? Is it expensive?Thank you for any help you can give, it means a lot.
I have discussed this a number of times in my blog; so you should search past postings.
I haven't changed my opinion that having an online presence, such as a blog, is the best way to develop a nationwide client base.
Giving free speeches to local service clubs is still the best way to grow a local client base.
Paying a marketing firm to steer clients to you is a waste of money. Those services are scams.
The right billing rate isn't an easy answer. I would probably start in the middle of the current rates for other CPAs in your area. That will give you room to raise your rates in future years as you become more proficient and the clients become more dependent on you.
In regard to the email address, most web hosting companies allow you to have 20 or more email addresses for each domain that you host with them. It's obviously a subjective issue, but I have always felt that someone is more professional who has an email address based on his/her own domain rather than using one of the freebie email services.
Good luck. I hope this helps.
I will definitely look through your blog posts for the information you mentioned. Thank you very much for responding so quickly!
Haiti Relief Donations Qualify for Immediate Tax Relief – IRS clarifies this recently enacted law.
People who give to charities providing earthquake relief in Haiti can claim these donations on the tax return they are completing this season, according to the Internal Revenue Service.
Taxpayers who itemize deductions on their 2009 return qualify for this special tax relief provision, enacted Jan. 22. Only cash contributions made to these charities after Jan. 11, 2010, and before March 1, 2010, are eligible. This includes contributions made by text message, check, credit card or debit card.
They also remind people:
Taxpayers have the option of deducting these contributions on either their 2009 or 2010 returns, but not both.
Of course, a year from now, there will be plenty of people who will very innocently accidentally deduct these same payments on their 2010 1040 as they total up payments made during the 2010 calendar year.
Making fun of the IRS Commissioner
From Late Night with Jimmy Fallon via NewsMax:
During a recent interview on C-SPAN, IRS Commissioner Douglas Shulman said he doesn’t do his own taxes because he finds “the tax code complex.” That’s like a surgeon saying, “You guys, blood grosses me out. So I don’t wanna . . . ”
From The Hill:
IRS commissioner doesn't file his own taxes – This is actually a misleading headline because the writer doesn’t seem to understand the difference between preparing tax returns and filing them with IRS. The Commissioner does file tax returns, but he uses a paid professional to prepare them. As embarrassing as this may be for the person in charge of enforcing this country’s tax laws, it doesn’t seem to be as bad as a Treasury Secretary or the Chairman of the House Ways and Means Committee who both intentionally cheat on their tax returns by omitting thousands of dollars of income.
Working with erroneous 1099 amounts
Subject: Taxable Prizes
Hi Mr. Kerstetter,
I won a prize during July 2009. The official rules posted in June stated the value of the prize to be $5,084. I received part of the prize in October 2009 and on that day I priced that model at a nearby store to be $3,010. About a month later I received the final part of the prize and I again valued it at the same store, $599. A total fair market value of $3,609. I contacted both the sponsor and the fullfillment company regarding the 1099 they will send me later this month. Both stated it would be for the amount posted in the rules and that if I disagreed I could dispute it with the IRS. I requested a copy of the invoices to see the actual fair market value of what the spent and they declined. The 1099 instructions state the FMV of any prizes should be used. So I am not sure how they are getting away with the fraud using average retail value when they had to actually order these items. Is my only recourse to wait to have the 1099 in hand and call the IRS to issue them a 4589?
You must either be trying to prepare your own tax returns or are working with a new inexperienced professional tax advisor because this is a very easy situation to deal with. I have had several similar cases over the years exactly like this.
There is no need to get into a fight with the company that awarded you the prizes over the 1099. It is standard practice for them to use as high a value on the prizes as they can justify for their own publicity purposes. They couldn't care any less about any tax problems this may cause you.
Only fools accept the figures on 1099s as gospel and use them unchanged on tax returns if there is good reason to suspect that they are incorrect.
As you should know, the legal burden of proving the accuracy of the figures on your tax return is on you. If you have done your homework and properly documented the true fair market value of the items you won as of the same dates, you can use those figures as your actual prize income. In fact, I would even attach copies of the documentation to your 1040 to avoid any IRS need to ask for it later on.
The way you avoid any problems with IRS not matching up their 1099 figures to your tax return is to use a backup schedule for Line 21 (Other Income) of your 1040. On it, your professional tax preparer should enter the full amount shown on the 1099 you received as a positive number. Below that, enter "Adjustments to reflect real world retail values per attached documentation" and enter negative numbers that will bring the net value into line with what you have determined to be reality.
I have done this literally dozens and dozens of times on client tax returns over the years, and IRS has never once disputed our adjusted values.
What you didn't mention or ask about are the deductions that you can claim due to your reporting this prize income. Prizes of the kind you received are in the same category as Gambling income. When you report gambling and prize income on Line 21, you are eligible to deduct gambling losses on Schedule A of up to the amount of the reported net winnings. Of course, these have to be legitimate and reasonable.
You can count all different types of gambling losses, including office pools, lottery tickets, raffle tickets, casinos, race tracks, as well as any entry fees for the drawing you won and other similar ones during the year. If you do a thorough enough job of documenting your losses, you may well be able to completely offset the income you are reporting on Line 21.
Again, you should be working with an experienced professional tax advisor who can ensure that these items are all properly shown on your tax returns.
Good luck. I hope this helps.
Thanks Kerry - this is a great big help!Sincerely,
Let's all try 71% worth...
It’s long been a stupid cliche when athletes and others promise to give an impossible 110 or more percent effort towards their goals. I found it funny that IRS is only promising to try to answer 71 percent of calls from the tax paying public and that is considered a great goal.
If you are lucky enough to have your phone call answered after their expected average wait time of 12 minutes, there is then the issue of whether you will get the correct answers. The odds of that happening are most likely going to be the same as in the past; 33% to 50%. It’s like a lottery.
Of course, the double standard is firmly in place. If you were to file a tax return with the stated goal of being 71% accurate in your figures, guess what hell you will be faced with.
If that were acceptable, the fine print info above the taxpayer’s signature on Page 2 of the 1040 would need to be modified to read as follows.
Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are 71% true, correct, and complete. Declaration of preparer (other than taxpayer) is based on 71% of all information of which preparer has any knowledge.
There are a couple of lessons to be learned from this IRS announcement.
1. Those people who foolishly try to save a few bucks by not utilizing the services of professional tax preparers will be risking their necks even more than ever.
2. This same philosophy of striving for a 71% rate of answering the phone is what we can expect for our health-care after that entire segment of our society is socialized and IRS employees are put in charge of administering our medical treatment. A 29% death rate will be considered as a success.
IRS Regulating More Tax Preparers
H&R Blockheads. The IRS wants to save you from your rogue tax accountant. - Being subject to extensive regulation and continuing education requirements as a CPA, I can't share this writer's sentiment that IRS is overstepping its bounds by requiring other "mom and pop" tax preparers to be regulated and take update courses.
I do share the writer's sentiment that the trend towards having the State and Federal governments prepare tax returns for people is not a positive development because of the extreme conflict of interest that entails.
Urban legend still floating around...
I have addressed this hoax previously, but it is still being passed around the net, as in this email I recently received from a client in the PRC.
Subject: Senate Bill 2099
Senate bill 2099 will require us to put on our 1040 federal tax form all firearms that we have or own. Do you know anything about this?
That's a hoax that's been floating around the net for about a year now. The 2009 forms are in place and they don't have anything for reporting firearms.
Snopes.com has a good explanation of it.
In case you haven't seen a copy of the actual 2009 1040, here is a blank one you can look at. You'll see that there is absolutely nothing about firearms.
Thank you for the info.
Changing a corp tax year
I’ve been teaching myself how to improve the vidcasts, and here is the first one with the semi-new style. The built-in hyper-link to my article on corp fiscal years doesn’t seem to be working, so here it is.
Cash-rich real estate investors trigger bidding wars, frustrate other buyers – I knew that this eventually had to happen, as the large pools of investor money moved from the intangible and often phony assets in the stock markets to the real tangible assets such as precious metals and real property. This is a very good sign during these extremely confusing economic times.
Lack of Estate Tax in 2010: Now Cheaper to Die? – Others are picking up on what I predicted back in 2001; that unless the law is changed, there will be a lot of mysterious deaths in 2010 as some heirs become overly aggressive in their desire to avoid the Death Tax.