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IRS Promises to Curtail Property Seizures After Abuses Come to Light

Tax Foundation - Tue, 2014-10-28 05:15

Over the weekend, the New York Times reported the case of Iowa restaurant owner Carole Hinders:

For almost 40 years, Carole Hinders has dished out Mexican specialties at her modest cash-only restaurant. For just as long, she deposited the earnings at a small bank branch a block away — until last year, when two tax agents knocked on her door and informed her that they had seized her checking account, almost $33,000.

The Internal Revenue Service agents did not accuse Ms. Hinders of money laundering or cheating on her taxes — in fact, she has not been charged with any crime. Instead, the money was seized solely because she had deposited less than $10,000 at a time, which they viewed as an attempt to avoid triggering a required government report.[…]

Using a law designed to catch drug traffickers, racketeers and terrorists by tracking their cash, the government has gone after run-of-the-mill business owners and wage earners without so much as an allegation that they have committed serious crimes. The government can take the money without ever filing a criminal complaint, and the owners are left to prove they are innocent. Many give up.

The Institute for Justice, a libertarian public interest law firm, is representing Hinders in her challenge, and notes that the IRS is making hundreds of such seizures a year but pursuing criminal action in only a fifth of them. IJ is representing clients in a number of similar cases.

The IRS responded to the New York Times:

After a thorough review of our structuring cases over the last year and in order to provide consistency throughout the country (between our field offices and the U.S. attorney offices) regarding our policies, I.R.S.-C.I. will no longer pursue the seizure and forfeiture of funds associated solely with “legal source” structuring cases unless there are exceptional circumstances justifying the seizure and forfeiture and the case has been approved at the director of field operations (D.F.O.) level. While the act of structuring — whether the funds are from a legal or illegal source — is against the law, I.R.S.-C.I. special agents will use this act as an indicator that further illegal activity may be occurring. This policy update will ensure that C.I. continues to focus our limited investigative resources on identifying and investigating violations within our jurisdiction that closely align with C.I.'s mission and key priorities. The policy involving seizure and forfeiture in “illegal source” structuring cases will remain the same.

I’m skeptical of how much the IRS is conceding here. As Professor Jack Townsend notes, the government position has generally been that they use forfeiture only in extraordinary circumstances and offers remedies to return the property. Now that we know this hasn’t been true, we shall have to wait and see if IRS actions appreciably change or if they just keep doing what they were doing.

Categories: Tax news

IRS Reaches Conclusion On Bank Transaction With Federal Financial Assistance - Mondaq News Alerts (registration)

Google IRS Federal Income Tax - Mon, 2014-10-27 12:41

IRS Reaches Conclusion On Bank Transaction With Federal Financial Assistance
Mondaq News Alerts (registration)
Sec. 1.597-1(b)) as the receiver. Failed Bank owned a single-member limited liability company (Bank LLC) that was treated as a disregarded entity for federal income tax purposes under Treas. Reg. Sec. 301.7701-3(b). Bank LLC held the regular and ...

Categories: Tax news

Protesters call for Hungarian PM to scrap Internet tax

Yahoo Tax - Sun, 2014-10-26 14:56

More than 10,000 people rallied in Budapest on Sunday to demand the scrapping of a proposed tax on Internet usage, calling it a "backward idea" amid growing criticism of the Hungarian premier. Chanting "Free Hungary, Free Internet!" the crowd marched on the headquarters of Prime Minister Viktor Orban's right-wing Fidesz party, leaving used computer keyboards at the gates in protest. "There will be no Internet tax... we will block it," organiser Balazs Gulyas told the crowd to cheers. Announcing the levy on Tuesday, Economy Minister Mihaly Varga said the tax -- 150 forints (0.50 euros, $0.61) on each transferred gigabyte of data -- was needed to help shore up the 2015 budget of one of the European Union's most indebted nations.


Categories: Tax news

Chillicothe man pleads guilty on embezzlement charge - Chillicothe Gazette

Google IRS Federal Income Tax - Fri, 2014-10-24 16:45

94Country WKKJ

Chillicothe man pleads guilty on embezzlement charge
Chillicothe Gazette
COLUMBUS – A Chillicothe man faces 30 years in prison and a fine up to $1 million after he pleaded guilty to one count of embezzlement and another count of filing a false federal income tax return with the Internal Revenue Service Friday. Joseph P ...
Molnar Pleads Guilty to Federal Criminal Charges94Country WKKJ
Former bank manager pleads guilty to embezzling $4.1 millionColumbus Dispatch

all 4 news articles »
Categories: Tax news

New Wealth Inequality Paper Confirms: Saving in Decline for the 90%

Tax Foundation - Fri, 2014-10-24 12:30

A new paper on wealth inequality from economists Emmanuel Saez and Gabriel Zucman – who have written frequently on the subject – was released earlier this month. This paper is far better than previous attempts to measure inequality. It includes pensions and other sources of wealth not taxed by the IRS – a shortcoming for which I have previously criticized measurements of inequality.

One of the most interesting findings in the paper was the finding that the saving rate had fallen extremely far for the lower 90% of America’s income distribution:

This is a trend I wrote about in a recent paper on the decline of saving and investment in America. It is worrisome that saving – which I believe is beneficial to society at large, but even more beneficial to the saver – is becoming an activity only for the rich.

Saez and Zucman further found that “saving inequality” actually drove wealth inequality even more than income did:

This is a problem worth correcting.

Some people simply earn too little to save. This is a problem that can only be addressed with a stronger, more competitive labor market. But the “bottom 90%” is a group that, as a whole, earns a lot of income. It includes plenty of people with six-figure salaries. It is puzzling and distressing to see savings so low for people who are, by all means, some of the richest on earth. Many of these households have six-figure incomes. One would think that they could put aside more. Increasing the caps on IRA contributions – or finding a more comprehensive tax treatment of saving – would probably help.

Saving cannot and should not be for the rich only.

Categories: Tax news

IRS Announces 2015 Retirement Plan Contribution Limits For 401(k)s And More - Forbes

Google IRS Federal Income Tax - Fri, 2014-10-24 10:44

WDIV Detroit

IRS Announces 2015 Retirement Plan Contribution Limits For 401(k)s And More
Forbes
For more on savings strategies if you have self-employment income, see How Entrepreneurs Can Get Big Tax Breaks For Retirement Savings. The SIMPLE IRA. The contribution limit on SIMPLE retirement accounts for 2015 is $12,500, up from $12,000 in ...
Workers can save more in 401(k) plans next yearSFGate
Taxpayers Can Invest up to $18000 in 401(k) Plans in 2015Accounting Today
IRS Posts New Limits for 2015 Retirement Plan ContributionsFinancial-Planning.com
InvestmentNews -FedSmith.com (blog) -Financial Advisor Magazine
all 79 news articles »
Categories: Tax news

IRS Simplifies Rules For Participants In Canadian Plans – Or Does It? - Mondaq News Alerts (registration)

Google IRS Federal Income Tax - Fri, 2014-10-24 02:45

IRS Simplifies Rules For Participants In Canadian Plans – Or Does It?
Mondaq News Alerts (registration)
The IRS has implemented amnesties for those dual taxpayers who have not been filing U.S. federal income tax returns. This allows non-filers to come into compliance without onerous penalties. A similar special one-time amnesty should be created for ...
Does TIGTA Foretell a Smooth Tax Season?Accountingweb.com
In the Blogs: All in the NumbersAccounting Today

all 6 news articles »
Categories: Tax news

Treasury IG: IRS needs to tighten up security before releasing tax data to ... - Washington Times

Google IRS Federal Income Tax - Thu, 2014-10-23 17:01

Washington Times

Treasury IG: IRS needs to tighten up security before releasing tax data to ...
Washington Times
The IRS should do more to make sure federal taxpayer information does not fall into the wrong hands when it provides data to Obamacare's insurance exchanges, the agency's auditor said Thursday. While investigators didn't say any data has been ... While ...
Report: IRS, states must improve protections for tax info of health care law ...Minneapolis Star Tribune
Report: Taxpayer data on ObamaCare state exchanges at riskThe Hill
Feds fault security of tax info gathered for health care law benefitsTribune-Review

all 62 news articles »
Categories: Tax news

Owners of Cadillac Ranch Restaurants and Associated Accountant Sentenced ... - eNews Park Forest

Google IRS Federal Income Tax - Thu, 2014-10-23 15:12

Owners of Cadillac Ranch Restaurants and Associated Accountant Sentenced ...
eNews Park Forest
On June 5, 2014, Couchot pleaded guilty to two tax fraud charges and admitted that he assisted in the preparation of false individual income tax returns for his clients Jon B. Field, Butler and Schilder, which caused a tax loss of over $191,000 to the ...

Categories: Tax news

Pass-Through Businesses are not Always Small Businesses

Tax Foundation - Thu, 2014-10-23 12:45

According to 2011 Census data, there are approximately 27 million businesses in the United States. Of these 27 million businesses, 90 percent of them are what are called “pass-through” businesses.

In regard to taxes, the most distinct feature of a pass-through business is that its income is taxed once on the owners’ individual tax returns. Contrast this with c corporations, which pay their taxes directly at the entity level through the corporate income tax then again at the individual level through dividend and capital gains taxes.

Many people think of pass-through businesses as synonymous with small business. However, this isn’t always the case. In fact, there a significant number of pass-through businesses that have 500 or more employees.

Census data shows that the stereotype holds when you look at the distribution of the size of pass-through businesses: 82.5 percent of all pass-through businesses are owned and operated without any employees.

Only .22 percent of all pass-through business establishments employ more than 100 workers and 0.04 percent employ 500 or more workers.

Compared to c corporations, pass-through businesses are still much smaller on average. The same Census data shows that 1.6 percent of corporate businesses employ 100 or more employees and 0.36 percent employ 500 or more employees. 44 percent employ between 1 and 100 employees.

However, in absolute terms, there are about as many pass-through businesses with 500 or more employees than there are traditional c corporations. According to the Census, there are approximately 9573 pass-through businesses with 500 or more employees and 9434 c corporations with 500 or more employees.

Pass-through businesses seem a lot smaller due to the fact that 21 million of them have zero employees.

To be fair, corporations with 500 or more employees average about 4000 employees a piece while pass-through businesses average 1000 a piece. 

Number of Businesses by Employment Size and Type

Size of Business (Employees)

C Corporations

Pass-Through Businesses

Zero Employees

1442732

21048348

1 to 100 Employees

1165629

4010967

Greater than 100

35117

54596

Greater than 500

9434

9573

Nonetheless, it still isn’t entirely accurate to conflate pass-through businesses with small businesses. Many of them are significant employers.

 

Categories: Tax news

Michigan Senate Advances Film Tax Credit Extension Bill

Tax Foundation - Wed, 2014-10-22 12:45

Michigan’s Senate approved a bill yesterday to extend the state’s film tax credit program, which was limited and reduced in 2011 and set to expire in 2017. It’s now up to the House to decide whether to proceed. From Mlive:

The bill would eliminate a 2017 sunset on funding for the film credit program, revise funding caps starting in 2015 and require employer organizations providing labor to be organized under Michigan law.

The state’s contribution to a film’s production and personnel expenditures would be capped at 25 percent, with another 3 percent for production expenditures at a qualified facility or 10 percent for expenditures at a postproduction facility.

Governor Rick Snyder (R) has consistently sought to cap the program at $25 million, but the Legislature doubled the subsidies to $50 million last year. The pre-2011 Granholm program was uncapped and Michigan taxpayers were subsidizing Hollywood productions at well over $100 million annually.

A big reason why Michigan pared the program back was a 2010 state-commissioned study that found the incentives cost $117 million and created 1,039 full-time equivalent jobs, for a cost of $112,800 per new job. Due to the nature of the film industry, most of the jobs are temporary and transient, with production companies using out-of-state labor to fill many positions.

Since then, California has tripled its film credit spending to over $300 million per year, and New York is over $400 million per year. To do battle with these states requires writing enormous checks to one of the most profitable industries in America. I would think Michigan has bigger priorities for its tax dollars than handouts for Hollywood.

Categories: Tax news

Piketty’s Wealth Tax Would Shrink the Economy by $1 Trillion

Tax Foundation - Wed, 2014-10-22 12:15

A wealth tax would not be good for the U.S. economy.

In his book, Capital in the 21st Century, Thomas Piketty suggests a wealth tax to fight income inequality. In a recent report, we used our Taxes and Growth model to evaluate the impact of such a tax on the U.S. economy.

Piketty suggests a couple variations on a wealth tax with different rates starting a various income levels. One suggestion would create a 1 percent tax on net wealth between 1 and 5 million euros ($1.3 to $6.5 million) and a 2 percent tax on income over 5 million euros ($6.5 million). He also mentions a tax on “modest to average wealth” with a 0.5 percent tax rate on net wealth between 200,000 and 1 million euros ($260,000 to $1.3 million).

Our model estimates that this tax would have a significant negative impact on the economy.

The Piketty wealth tax would shrink the economy by close to $1 trillion in total size (down 6.1 percent), decrease wages by 5.2 percent and total investment would drop by over 16 percent. Additionally, it would eliminate 1.1 million jobs.

Overall, the tax would reduce after-tax income by 9.2 percent and, while the top 1 percent would see their incomes drop 13.2 percent, the bottom 20 percent would also see they income drop 7.3 percent.

In the end, Piketty’s wealth tax—in pursuit of reducing income inequality—would make everyone worse off due to decreased economic activity.

In a previous paper we evaluated the effect of Piketty’s 80 percent tax rate on wage and investment income and found that it would shrink the economy by nearly $3 trillion.

Categories: Tax news

Harding surgeon charged with evading taxes on more than $10 million in income - New Jersey Hills

Google IRS Federal Income Tax - Wed, 2014-10-22 10:18

Harding surgeon charged with evading taxes on more than $10 million in income
New Jersey Hills
By falsely characterizing personal expenses as corporate expenses, Evdokimow allegedly received an additional $3,123,721 in personal income from the De'Omilia accounts, which he failed to report to the IRS on his federal income tax returns.

Categories: Tax news

Hungary plans new tax on Internet traffic, public calls for rally

Yahoo Tax - Wed, 2014-10-22 05:47
By Marton Dunai BUDAPEST (Reuters) - Hungary plans to impose a new tax on Internet data transfers, a draft 2015 tax bill submitted to parliament late on Tuesday showed, in a move that could hit Internet and telecoms providers and their customers hard. The draft tax code contains a provision for Internet providers to pay a tax of 150 forints (60 US cents) per gigabyte of data traffic, though it would also let companies offset corporate income tax against the new levy. ...
Categories: Tax news

Hungary ruling party proposes cap on planned Internet tax: statement

Yahoo Tax - Wed, 2014-10-22 05:27
BUDAPEST (Reuters) - Hungary's ruling Fidesz party on Wednesday proposed setting a cap on a planned Internet tax that led to an outcry from the Internet and telecommunications sectors, which could face bills for hundreds of billions of forints under the original plan. "We think it is practical to introduce an upper limit in the same fashion and of the same magnitude that applied to voice-based telephony in the previous tax code," Fidesz parliament group leader Antal Rogan said in an emailed statement. Previously, private individuals' tax payments were maximized at a monthly 700 forints ($2. ...
Categories: Tax news

IRS Collection Action Can Be Delayed For A Long Time - Forbes

Google IRS Federal Income Tax - Tue, 2014-10-21 17:19

IRS Collection Action Can Be Delayed For A Long Time
Forbes
The IRS assessed tax and penalties on all five years in 1997. What a lot of people do not understand is there are two almost entirely separate due process systems with respect to the federal income tax. One is about determining the correct tax.

Categories: Tax news

British Columbia sets new LNG income tax at 3.5 percent

Yahoo Tax - Tue, 2014-10-21 16:31
By Julie Gordon VICTORIA B.C. (Reuters) - British Columbia unveiled its long-awaited liquefied natural gas tax legislation on Tuesday, setting out a preliminary top rate of 3.5 percent, which the Canadian province said adds up to the most competitive total tax regime of any Western jurisdiction. The new tax, which applies to income from the liquefaction of natural gas, will rise to 5 percent in 2037, giving the nascent industry a two decade break period to establish itself in the Pacific Coast province. At 3. ...
Categories: Tax news

Local woman gets probation for impersonating IRS agent - Baxter Bulletin

Google IRS Federal Income Tax - Tue, 2014-10-21 13:50

Baxter Bulletin

Local woman gets probation for impersonating IRS agent
Baxter Bulletin
The letter discussed the chamber's application for 501(c)3 status and said the IRS approved the application. The letter also said that the chamber was "exempt from Federal income tax under section 501(c)(3) of the Internal Revenue Code." The letter was ...

and more »
Categories: Tax news

Tax Foundation Awards for Outstanding Achievement in State Tax Reform in 2014

Tax Foundation - Tue, 2014-10-21 07:30

Today, the Tax Foundation is honoring six individuals with the second annual award for Outstanding Achievement in State Tax Reform. As the award’s name suggests, the honorees were selected due to their extraordinary efforts to advance the cause of simpler, smarter tax policy in the previous year.

Working for better tax policy is not easy, and although a small glass award hardly compares to the efforts the recipients put into what they helped achieve, we believe that it’s important to do something to recognize their impressive achievements for the taxpayers of their states.

Many legislators and activists from both sides of the aisle recognized the need for smarter, more principled tax policy in 2014 and we are honored to present these awards in recognition of their efforts and successes.

The following individuals are the recipients of the 2014 Outstanding Achievement in State Tax Reform award.

New York Governor Andrew Cuomo (D-NY) in 2014 achieved smarter tax policy through a comprehensive corporate tax reform bill that transformed New York’s treatment of corporate taxes from one of the worst in the country to one of the best.

Nebraska Governor Dave Heineman (R-NE) has worked over the last several years to improve Nebraska’s tax climate. Through rate reductions, the repeal of the AMT, NOL reforms, and other successes, Heineman led the charge for substantive reform.

Michigan Governor Rick Snyder (R-MI) in 2014 continued his efforts to improve Michigan’s tax climate by building on previous successes and repealing the MBT and restructuring incentive programs to the repeal of personal property taxes.

Indiana Senator Brandt Hershman (R-IN) in 2014 worked to expand Indiana’s trend of substantive reforms in recent years. He authored or co-authored the reduction of Indiana’s corporate income tax rate, elimination of the inheritance tax, enactment of property tax caps, lowering of income tax rates and reform the State’s treatment of personal property taxes, which now serves as a model for other states.

DC Council Chairman Phil Mendelson (D-DC) took the lead on pushing through comprehensive tax reform recommendations from a bipartisan D.C. Tax Revision Commission in 2014. The reforms represent a major improvement of the District’s tax code, balancing competing priorities to improve the simplicity, fairness, neutrality, and economic competitiveness of D.C.’s tax system.

John Simmons of the Rhode Island Public Expenditure Council, which was the voice in Rhode Island making certain that the State’s policymakers and citizens were aware of the state’s tax challenges and the consequent successes in individual and corporate tax systems.

Previous winners include Indiana Governor Mike Pence, Michigan Governor Rick Snyder, New Mexico Governor Susana Martinez, North Carolina Senator Phil Berger, Wisconsin Representative Dale Kooyenga, and Ohio activist Ron Alban.

Categories: Tax news

IRS sues prominent Boston lawyer over $2.7M in taxes, penalties - Boston Herald

Google IRS Federal Income Tax - Tue, 2014-10-21 03:00

Boston Herald

IRS sues prominent Boston lawyer over $2.7M in taxes, penalties
Boston Herald
The complaint states Denner had a payment plan worked out for his 2002 taxes but did not keep up with the payments. “In 2006, Jeffrey A. Denner defaulted on his installment agreement with the IRS with regard to his 2002 federal income tax liability ...

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