Friday, January 31, 2014

Guaranteed Payments - A Short Primer -

Super Bowl’s Hidden Treasure… the Jock Tax

Super Bowl's Hidden Treasure… the Jock Tax
// AICPA Insights

Super-bowl-hotelAs the focus here in New Jersey switches from "Bridgegate" to "tailgate," we think about the things that we love best about the Super Bowl. A few of mine include eating wings, drinking beer and, of course, watching those witty commercials. However, as the players gear up to battle the elements this week, one other thing separates this Super Bowl from the others: the proverbial taxman. Many states impose an income tax on nonresidents' earnings and New Jersey is one of them. To professional athletes, it is known as the "jock tax." 

Most professional athletes are paid for the time they are required to work.  These are known as "duty days" and in a typical season an NFL championship player can expect to work for about 235 days. This number becomes the denominator in our equation. The numerator is the number of days worked in any given state. So for example, once Peyton Manning landed at Newark airport this week to attend the numerous mandatory press conferences, events and practices, he will end up with about eight duty days. Moreover, if he decides not to retire after the big game, we will see him back in New Jersey this fall to play the Jets, giving him another two duty days. For the math enthusiasts reading today, you may have already deduced that about 4.26% (based on 10/235 duty days) of Manning's total compensation (an estimated $15 million) will be considered to have been derived from New Jersey sources. If we apply New Jersey's top tax rate of 8.97%, his friends in Trenton should be expecting to receive about $57,500.

Manning's opposition, the Seattle Seahawks hail from a tax haven. The state of Washington does not impose an income tax on individuals. So assuming most players and coaches are residents of Washington, they are really coming out of pocket to play in New Jersey. This is in great opposition to many prior games played in states such as Florida and Texas. Aside from being more temperature friendly, neither imposes an income tax at the state level.

So what is the silver lining? Well, state income taxes are generally deductible on a player's Federal tax return. If we assume the top Federal rate at 39.6%, Peyton will recoup approximately $23,000 of his New Jersey outlay. Secondly, he will receive a tax credit against his home state of Colorado's income tax assuming he is settled into his beautiful new home in Cherry Hills Village.  

In conclusion, we've focused on a small area of taxation for the purposes of this post today. Another thing to consider is that all the players (not just Manning), along with the coaches and anyone else who normally travels with the team will pay their fair share of New Jersey's "jock tax." If we couple this with the sales tax revenues from the estimated 400,000 people expected in the area this week, Governor Christie has a lot to be smiling about now.

Raymond M. Pinglora, III, CPA, MST, Principal/Tax Partner, Van Duyne, Bruno & Co., P.A.Based in New Jersey, the firm specializes in providing accounting, tax and advisory services to the professional sports and entertainment industries.

Why does a company prepare a bank reconciliation?

Why does a company prepare a bank reconciliation?
// AccountingCoach
My top 3 reasons for a company to prepare a bank reconciliation are:
  1. To be certain that the amount of cash reported on the company's balance sheet (and the balance in its general ledger Cash account) is the correct amount. The additions and deductions on the bank statement are compared (or reconciled) with the items that are entered in the company's general ledger Cash account. Some differences, such as outstanding checks and deposits in transit, are noted as simply timing differences.
  2. Since most companies use double-entry accounting or bookkeeping, any omission or error in the company's general ledger Cash account also means that another general ledger account will have a corresponding omission or error. For example, if a company had wired money from its bank account for emergency computer maintenance services and had not recorded the credit to its Cash account, it is also omitting the debit to the account Computer Maintenance Expense. The bank reconciliation could prevent this company from issuing an incorrect balance sheet (incorrect Cash and incorrect Retained Earnings) and an incorrect income statement (expenses would be too low, net income would be too high).
  3. Performing a bank reconciliation results in improved internal control over the company's cash if done by someone other than the employee(s) handling and/or recording receipts and payments. Having another person reconciling the bank statement is known as the separation or segregation of duties and it should reduce the odds of dishonest acts involving the company's cash.
The bank reconciliation is also referred to as the bank statement reconciliation or as the bank rec.

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Fwd: A Phrase A Week - Spoonerisms


When I opted for a temporary break from A-Phrase-A-Week I did aim to send A-Phrase-Every-Now-And-Again, and this is one such...


An accidental transposition of the initial sounds, or other parts, of two or more words.


SpoonerismThe Rev. William Archibald Spooner (1844–1930), who was a fellow and warden of New College, Oxford, is inextricably linked with the slips of the tongue that bear his name. Spooner was an albino and, more to the point for this piece, a sufferer of dysgraphia, which is a form of dyslexia that is characterised in the OED as 'a disturbance of the clear distinction of the sounds of words, confusion between closely related phonemes'. The albinoism may in fact have played a part in this as it is often associated with poor eyesight, which was certainly a symptom in Spooner's case.

Although his reputation for making what came to be called spoonerisms was widespread, most of the best known examples are inventions by others and it is impossible to tell which are genuine mistakes (by Spooner or otherwise) and which are made up for effect. For example, he is supposed to have said "I am a birdwatcher", which would un-spoonerise as 'I am a word botcher'. An excellent comic example should he ever have said it but, sadly, he didn't. The term 'spoonerism' was known colloquially in Oxford in his lifetime and was first written down in this piece from the London newspaper The Globe, February 1900:

To one unacquainted with technical terms it sounds as if the speaker were guilty of a spoonerism.

The good reverend gained both fame in his lifetime and linguistic immortality by the eponymous gaffes, which his otherwise unexceptional academic career wouldn't have brought him. Nevertheless, he didn't welcome his notoriety and in later life became rather cross about it. At a college dinner given in his honour on his retirement the undergraduates called for a speech; Spooner stood up and said, "You want me to say one of those things; but I shan't", and sat down.

As far as can be ascertained, the only example of a spoonerism actually said by Spooner is:

You will find as you grow older that the weight of rages will press harder and harder upon the employer.

He is also widely reported to have acknowledged coinage of 'The Kinquering Congs Their Titles Take' (in reference to a hymn) but I can find no convincing evidence of that admission.

Spooner's reputation must have come from somewhere and, although no doubt exaggerated by Oxford undergraduates who had developed a fashion for nonsense-speak in the late 18th century, he probably uttered other examples that went unrecorded. More reliable are the accounts of ideas or words that demonstrate the occasional transpositions caused by his mild mental disorder:

On one occasion he spilt salt on the tablecloth and poured claret on top of it.

On a tour of his college he remarked on the darkness of a staircase before turning off all the lights and attempting to lead a party down the stairs in the dark.

He asked an acquaintance "Was it you or your brother who was killed in the war?"

Commenting on another acquaintance he remarked "Her late husband, you know, a very sad death - eaten by missionaries - poor soul!"

Here's a list of spoonerisms that are often supposed to have been uttered by the reverend gentleman but come with the giveaway 'attributed to' label:

You have hissed all my mystery lectures. You have tasted a whole worm. Please leave Oxford on the next town drain. (You have missed all my history lectures. You have wasted a whole term. Please leave Oxford on the next down train.)

The Lord is a shoving leopard (loving shepherd)

A well-boiled icicle (well-oiled bicycle)

You were fighting a liar in the quadrangle (lighting a fire)

Let us raise our glasses to the queer old dean! (dear old queen, referring to Queen Victoria)

From Iceland’s greasy mountains (From Greenland’s icy mountains)

Dr. Friend’s child (referring to a friend of a Dr. Child)

Is it kisstomary to cuss the bride? (customary to kiss)

A blushing crow. (crushing blow)

Is the bean dizzy? (Dean busy)

Someone is occupewing my pie, please sew me to another sheet. (someone is occupying my pew, please show me to another seat.)

A nosey little cook. (cozy little nook).

As to spoonerisms unambiguously invented by others, they are legion. Here are a few:

Annual shower flow (annual flower show)
Bad salad (sad ballad)
Bass-ackwards (ass-backwards)
Bat flattery (flat battery)
Bedding wells (wedding bells)
Belly jeans (jelly beans)
Birthington's washday (Washington's birthday)
Blushing crow (crushing blow)
Bowel feast (foul beast)
Britannia waives the rules (Britannia rules the waves)
Bunny phone (funny bone)
Cat flap (flat cap)
Chewing the doors (doing the chores)
Chipping the flannel (flipping the channel)
Cop porn (popcorn)
Crawls through the fax (falls through the cracks)
Damp stealer (stamp dealer)
Fight in your race (right in your face)
Flock of bats (block of flats)
Flutter by (butterfly)
Full bottle in front of me (full frontal lobotomy)
Go help me sod (so help me God)
Hiss and leer (listen here)
Hypodermic nurdle (hypodermic needle)
I'm shout of the hour (I'm out of the shower)
Keys and parrots (peas and carrots)
Know your blows (blow your nose)
Lack of pies (pack of lies)
Lead of spite (speed of light)
Mad banners (bad manners)
Mad bunny (bad money)
Mean as custard (keen as mustard)
Mend the sail (send the mail)
My zips are lipped (my lips are zipped)
Nasal hut (hazelnut)
Nicking your pose (picking your nose)
No tails (toenails)
Pit nicking (nitpicking)
Plaster man (master plan)
Pleating and humming (heating and plumbing)
Ready as a stock (steady as a rock)
Rental deceptionist (dental receptionist)
Roaring with pain (pouring with rain)
Sale of two titties (Tale of Two Cities)
Sealing the hick (healing the sick)
Shake a tower (take a shower)
Sir Stifford Crapps (Sir Stafford Cripps)
Soppy cheese (choppy seas) 
Soul of ballad (bowl of salad)
Tease my ears (ease my tears)
The rutting season for tea cosies (the cutting season for tea-roses)
This is the pun fart (this is the fun part)
Tons of soil (sons of toil)
Too titty to be a preacher (too pretty to be a teacher)
Trail snacks (snail tracks)
Wave the sails (save the whales)

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Obama Plans MyRA Retirement Savings Accounts

Mazzola nailed it:

"Another certified financial advisor shared his concerns. "President Obama's "MyRA" is another simple-minded response to a serious problem afflicting our nation's citizenry," said Daniel G. Mazzola, a certified financial analyst and CPA from Long Island, N.Y. "Is it appropriate to encourage people to invest in long-term Treasury bonds in a climate of historically low interest rates? Will the money deducted be placed in a separate account for each individual or a general trust fund like the Social Security Trust Fund with which the government has access and can use for general expenditures?"

"Is the President unaware that it is relatively easy for a private sector worker to establish an IRA at a local bank or brokerage house?" Mazzola added. "Making it easier for people to set aside money for retirement is a small measure when compared to providing an overall environment in which they have an opportunity to be successful."

Tuesday, January 28, 2014

Final version of net investment income tax form released [feedly]

Final version of net investment income tax form released
// Journal of Accountancy
Just in time for the start of tax season, the IRS has released the final version of Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, which will be used by individuals and trusts and estates to compute the new 3.8% tax and then to report the tax on Forms 1040, U.S.

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Preparation for State of the Union: Data on Inequality, Mobility, and Redistribution

This is an important part of our capitalist system.  No other system in the history of the world provides upward mobility like capitalism:
  • Mobility: IRS panel data that tracked the same group of taxpayers between 1999 and 2007 showed that Americans can move from one economic group to another fairly quickly.

Begin forwarded message:

 Preparation for State of the Union: Data on Inequality, Mobility, and Redistribution

Preparation for State of the Union: Data on Inequality, Mobility, and Redistribution


Official Statistics on Inequality, the Top 1%, and Redistribution

A summary in preparation for the State of the Union

Washington, D.C., January 27, 2014—The State of the Union address is set for tomorrow evening, and the President will reportedly spend much of his time addressing inequality and mobility in America. In preparation for tomorrow's speech, and in order to help ensure that post-speech discussions are informed by hard data, the nonpartisan Tax Foundation has released a summary of some of the recent work done on inequality and mobility by the Congressional Budget Office and IRS and has included links to the original source material.

Highlights of these reports include:

  • Inequality: CBO data shows that inequality today is slightly higher than the average of the past thirty years, but less that it was during the last two years of the Clinton administration.
  • Progressivity: According to the CBO's progressivity index, the federal tax code is as progressive today as it has been at any time during the past thirty years.
  • The Top 1%: The Top 1% continues to pay a larger share of the federal income tax burden than the bottom 90 percent combined.
  • Redistribution: Using 2006 data, CBO found that tax and spending policies combined to redistribute $1.2 trillion in income from the top 40 percent of non-elderly households to the bottom 60 percent of non-elderly households.
  • Mobility: IRS panel data that tracked the same group of taxpayers between 1999 and 2007 showed that Americans can move from one economic group to another fairly quickly.

"Undoubtedly, these issues will generate a considerable amount of rhetoric by pundits and politicians on both sides of the aisle," said Tax Foundation President Scott Hodge. "Much of this rhetoric will not be supported by data or facts and can lead to a misunderstanding of the state of our tax system."

Full report: Official Statistics on Inequality, the Top 1%, and Redistribution

Media Contact:
Richard Borean
Manager of Communications
Tax Foundation

The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels.

Friday, January 24, 2014

National Taxpayer Advocate Delivers Annual Report to Congress; Focuses on Taxpayer Bill of Rights and IRS Funding

National Taxpayer Advocate Delivers Annual Report to Congress; Focuses on Taxpayer Bill of Rights and IRS Funding

IR-2014-3, Jan. 9, 2014

WASHINGTON — National Taxpayer Advocate Nina E. Olson today released her 2013 annual report to Congress, urging the Internal Revenue Service to adopt a comprehensive Taxpayer Bill of Rights – a step she said would increase trust in the agency and, more generally, strengthen its ability to serve taxpayers and collect tax. The Advocate also expressed deep concern that the IRS is not adequately funded to serve taxpayers, pointing out that the IRS annually receives more than 100 million telephone calls from taxpayers and that, in fiscal year 2013, the IRS could only answer 61 percent of calls from taxpayers seeking to speak with an IRS customer service representative.

“The year 2013 was a very challenging one for the IRS. Because of sequestration, the IRS’s funding was substantially cut, which translated into a reduction in taxpayer service,” Olson said in releasing the report. “Public trust in its fairness and impartiality was called into question because of reports the IRS subjected certain applicants for tax-exempt status to greater review based on political-sounding names. And because of the 16-day government shutdown, the agency could not complete preparations for the upcoming tax filing season on time, delaying the date on which taxpayers can first file returns and claim refunds.”

Olson continued: “From challenges can come opportunities, and this report presents a ‘21st century vision’ designed to meet taxpayer needs and enhance voluntary tax compliance.”

The report reiterates the Advocate’s longstanding recommendation that the IRS adopt a Taxpayer Bill of Rights (TBOR). In a prior report, Olson analyzed the IRS’s processing of applications for tax-exempt status and concluded its procedures violated eight of the ten taxpayer rights she has proposed. Today’s report argues that the rationale for a TBOR is much broader.

“Taxpayer rights are central to voluntary compliance,” the report says. “If taxpayers believe they are treated, or can be treated, in an arbitrary and capricious manner, they will mistrust the tax system and be less likely to comply with the laws voluntarily. If taxpayers have confidence in the fairness and integrity of the system, they will be more likely to comply.”

The report emphasizes that the U.S. tax system is built on voluntary compliance. Ninety-eight percent of all tax revenue the IRS collects is paid timely and voluntarily. Only 2 percent results from IRS enforcement actions. For the taxpayer, voluntary compliance means not having to face IRS enforcement. For the government, voluntary compliance is cheapest, because enforced compliance requires the IRS to devote resources to detecting and collecting amounts that are not voluntarily reported or paid.

While arguing that knowledge of taxpayer rights promotes voluntary compliance, the report cites a survey of U.S. taxpayers conducted for TAS in 2012 that found less than half of respondents believed they have rights before the IRS and only 11 percent said they knew what those rights are.

“The Internal Revenue Code provides dozens of real, substantive taxpayer rights,” the report says. “However, these rights are scattered throughout the Code and are not presented in a coherent way. Consequently, most taxpayers have no idea what their rights are and therefore often cannot take advantage of them.”

The report calls on the IRS to take the taxpayer rights that already exist and group them into ten broad categories, modeled on the U.S. Constitution’s Bill of Rights. The report says the “simplicity and clarity” of a thematic, principle-based Taxpayer Bill of Rights would help taxpayers understand their rights in general terms.

“A Taxpayer Bill of Rights would serve as an organizing principle for tax administrators in establishing agency goals and performance measures, provide foundational principles to guide IRS employees in their dealings with taxpayers, and provide information to taxpayers to assist them in their dealings with the IRS,” the report says.

The ten rights the Advocate is proposing are detailed in the report. Olson has been in discussions with senior IRS officials about publishing a TBOR, and TAS has just completed a series of focus groups with taxpayers and preparers to gauge reaction to, and comprehension of, the proposed list. Olson said the IRS has been open to publishing a proposed TBOR, and she will continue to work with the IRS leadership to refine and publish a TBOR during the coming year.

The report identifies the lack of adequate IRS funding as a top problem for taxpayers. Each year, more than 100 million taxpayers call the IRS for help and millions more visit IRS walk-in sites or send correspondence. Key metrics show the agency is increasingly unable to keep up with taxpayers’ demand for help in complying with their tax obligations.

“The requirement to pay taxes is generally the most significant burden a government imposes on its citizens,” the report says. “The National Taxpayer Advocate believes the government has a practical and moral obligation to make compliance as simple and painless as possible.” The report also points out that federal spending cuts, which are designed to reduce the budget deficit, have the effect of increasing the deficit when applied to the revenue collection agency.

Impact on Taxpayer Service. The report says the IRS’s workload has increased over the past decade, and since FY 2010, IRS funding and staffing have been cut by 8 percent. The report highlights key areas in which the quality of taxpayer service has dropped to unacceptable levels:
  • Last year, the IRS could only answer 61 percent of calls from taxpayers seeking to speak with a customer service representative (CSR). That’s down from 87 percent ten years earlier, with half the decline occurring since FY 2010. In FY 2013, 39 percent of calls (some 20 million) simply did not get through.
  • Taxpayers who did get through had to wait on hold approximately 17.6 minutes before speaking with a CSR. That’s up from 2.6 minutes ten years earlier, a nearly six-fold increase, with nearly half the increase occurring since FY 2010.
  • Millions of taxpayers visit IRS walk-in sites each year for assistance. Ten years ago, the IRS answered some 795,000 tax law questions in the sites during the filing season. Last year, it handled about 110,000 tax law questions during the filing season – a reduction of 86 percent.
  • The IRS historically has prepared tax returns for taxpayers seeking its help, particularly for low income, elderly, and disabled taxpayers. Ten years ago, it prepared some 476,000 returns. That number declined significantly over the decade, and the IRS recently announced it will no longer prepare returns at all.
  • Last year, the IRS received about 8.4 million letters from taxpayers responding to proposed adjustments to their tax liabilities. As of the end of the fiscal year, 53 percent of taxpayer letters in the IRS’s “adjustments” inventory were considered “over age” (generally, more than 45 days old). That compares with “over age” percentages of 12 percent ten years earlier and 28 percent in FY 2010.
  • The IRS recently announced it will only answer “basic” tax law questions on its telephone lines and in its walk-in sites during the upcoming filing season and it will not answer any tax law questions after the filing season, including questions from the millions of taxpayers who obtain filing extensions and prepare their returns later in the year.

Olson made clear that the deficiencies in taxpayer service are attributable primarily to a lack of resources. Regardless of cause, she wrote, “it is a sad state of affairs when the government writes tax laws as complex as ours – and then is unable to answer any questions beyond ‘basic’ ones from baffled citizens who are doing their best to comply.”

The Advocate expressed particular concern about the magnitude and impact of cuts to the IRS’s training budget. Since FY 2010, the IRS’s training budget has been cut from $172 million to $22 million. “If IRS customer service representatives are not well trained, taxpayers calling for help are more likely to receive incorrect information or no information,” the report says. “If IRS enforcement employees are not well trained, auditors may make inappropriate adjustments and assessments, and collection employees may issue inappropriate levies or file inappropriate liens.

Impact on Voluntary Compliance and Revenue Collection. The report notes that the cuts to IRS funding since FY 2010 have been made as part of across-the-board reductions to federal discretionary spending designed to reduce the budget deficit. But “the logic behind budget cuts simply does not apply to the funding of the IRS,” the report says. The IRS collected $255 for each $1 it received in appropriated funds in FY 2013. “If the Chief Executive Officer of a Fortune 500 company were told that each dollar allocated to his company’s Accounts Receivable Department would generate multiple dollars in return,” the report says, “it is difficult to see how the CEO would keep his job if he chose not to provide the department with the funding it needed. Yet that is essentially what has been happening with respect to IRS funding for years.”

Olson said IRS funding is shortchanged because the federal budget rules treat the IRS the same way they treat all spending programs – with no “credit” given for the revenue it collects.  “This procedure makes little sense when applied to the IRS,” she wrote. “For virtually every other spending program, a dollar spent is just that – it increases the deficit by one dollar. But a dollar spent on the IRS generates substantially more than one dollar in return – it reduces the budget deficit.”

The report reiterates the Advocate’s longstanding recommendation that the relevant congressional committees work together to develop new procedures to fund the IRS, with the goal of maximizing tax compliance, particularly voluntary compliance, with due regard for protecting taxpayer rights and minimizing taxpayer burden.

Federal law requires the Annual Report to Congress to identify at least 20 of the “most serious problems” encountered by taxpayers and to make administrative and legislative recommendations to mitigate those problems. Overall, this year’s report identifies 25 problems, makes dozens of recommendations for administrative change, makes five recommendations for legislative change, and analyzes the 10 tax issues most frequently litigated in the federal courts.
Among the “most serious problems" addressed are the following:

Need for Return Preparer Oversight. In 2002, the National Taxpayer Advocate began advocating for regulation of unenrolled tax preparers to protect taxpayers from incompetent and unscrupulous preparers. In 2011, the IRS began implementing regulations to register, test, and require continuing education for unenrolled preparers. In 2013, a U.S. District Court invalidated regulations governing the IRS’s testing and continuing education requirements, holding that they exceeded the authority of the Treasury Department to impose absent authorizing legislation. If the district court’s decision is upheld on appeal, the Advocate urges the IRS to adopt a multi-pronged strategy to protect taxpayers by pursuing education and enforcement options that are unambiguously within its purview. Of particular note, the Advocate recommends that the IRS give unenrolled preparers an opportunity to earn a voluntary testing and continuing education certificate and limit the ability of unenrolled preparers who do not earn the certificate to represent taxpayers in audits of returns they prepare. The Advocate also recommends Congress enact legislation to clarify that the IRS may regulate unenrolled paid preparers directly.

The IRS’s Conceptual Approach Toward Collection of Delinquent Tax Liabilities. The report urges the IRS to fundamentally reassess its traditional approach toward Collection. In her preface to the report, Olson cites third-party studies that often use the number of levies served and liens filed as a measure of the Collection function’s effectiveness. Contrary to this “conventional wisdom,” she notes, IRS Collection revenue actually increased in the aftermath of the IRS Restructuring and Reform Act of 1998 when the IRS reduced levies served by 94 percent and liens filed by 47 percent. Similarly, she notes that Collection revenue has increased slightly over the last few years, despite a 51 percent reduction in levies since FY 2011 and a 45 percent reduction in liens since FY 2010. Olson says that earlier personal contacts with delinquent taxpayers and more flexible use of payment options for financially struggling taxpayers, such as installment agreements and offers in compromise, would be more effective than increasing the number of levies and liens filed by automation. The report acknowledges that the use of levies, liens, and seizures remains appropriate with respect to taxpayers who can afford to pay their tax liabilities but refuse to do so.

The Impact of the IRS’s Offshore Voluntary Disclosure Programs on Taxpayers Who Make Honest Mistakes. The IRS has sought to increase enforcement of Foreign Bank and Financial Accounts (FBAR) reporting and similar information reporting requirements in recent years and has offered a series of offshore voluntary disclosure (OVD) programs to settle with taxpayers who have failed to file the required forms. However, the report says, the programs impose excessive penalties on taxpayers whose failure to file was not “willful.” Analyzing results from the IRS’s 2009 OVD program, the Advocate found the median offshore penalty was about 381 percent of the additional tax assessed for taxpayers with median-sized account balances, and 580 percent of the tax assessed for taxpayers with the smallest account balances (i.e., the bottom 10 percent, with an average $44,855 account balance). Taxpayers who “opted out” of the OVD program and agreed to subject themselves to audits fared better but still faced penalties of nearly 70 percent of the tax and interest. While FBAR penalties are computed as a percentage of account balances rather than tax liabilities, the report offers the comparison to illustrate that the penalties are often Draconian and may deter other taxpayers from coming into compliance.

New TAS Research Studies on Tax Compliance. Volume 2 of the report contains six research studies, including three that relate directly to tax compliance:
  • An assessment of accuracy-related penalties imposed on Schedule C filers found that penalties do not increase future reporting compliance.
  • A comparison of the effectiveness of Revenue Officers (ROs) and the IRS’s Automated Collection System (ACS) in addressing employment tax liabilities found that ROs collected more dollars and resolved delinquencies more quickly than ACS, but neither channel was effective at promoting future tax compliance.
  • A study regarding tax compliance by sole proprietors found that taxpayer service and social norms were the two most influential factors affecting compliance behavior.  Contrary to expectation, the study found that traditional deterrence theory did not play a role in promoting compliance, possibly because sole proprietors were particularly motivated by short-term cash flow needs.
Volume 2 also contains an analysis designed to further the National Taxpayer Advocate’s 2009 recommendation that the IRS develop a plan and timeline to achieve an accelerated third-party information reporting and document-matching system. The analysis describes the steps that must be taken and the benefits to taxpayers and the IRS of accelerating receipt and processing of third-party information reports, such as Forms W-2 and 1099.
   *           *           *           *           *
Please visit for more information about this report, including an Executive Summary and downloadable infographics on the Most Serious Problems.
Related Items: 
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About the Taxpayer Advocate Service
The Taxpayer Advocate Service is an independent organization within the IRS and is the taxpayer’s voice at the IRS. TAS employees help taxpayers who are experiencing financial difficulties, such as not being able to provide necessities like housing, transportation, or food; taxpayers who are seeking help in resolving problems with the IRS; and taxpayers who believe an IRS system or procedure is not working as it should. If you believe you are eligible for TAS assistance, you can reach TAS by calling 877–777–4778 (toll-free).

Thursday, January 23, 2014

With Tax Time Nearly Upon Us, Let's Look at Some Unique Tax Service Locations

With Tax Time Nearly Upon Us, Let's Look at Some Unique Tax Service Locations

My ex used to get his taxes done in the back of the same place where he got his hair cut (no wonder he had IRS problems all the time) which I guess is a big thing in San Francisco among the immigrant set. And it's not just San Francisco. We dug up a few questionable tax services joints, feel free to add your own.

Silver Spring, MD

Memphis, TN (and we have discussed Mo' Money before)

Bronx, NY Get your taxes done while your drawers dry!

Memphis, TN This can't be real, can it?

Oh dear Lord... you'd be better off utilizing the services of Business Cat.


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Former IRS Employee Pleads Guilty to Claiming $1.7M in Fraudulent Tax Refunds

Tuesday, January 14, 2014

Identity thieves gear up to steal your tax refund

Identity thieves gear up to steal your tax refund
Identity theft is already a serious problemthe No. 1 complaint to the FTCand tax-related identity theft is a growing part of this crime spree.

Friday, January 10, 2014

Members of Congress Won't Read This Bill

Members of Congress Won't Read This Bill

Passing bills to find out what's in them… that was so 2010, right?

Sadly, no.

Any day now, Congress is likely to release the trillion-dollar Trojan horse that is the spending bill for 2014. It's going to be big, and it's going to be rushed. And few members of Congress (if any) are going to read it all.

Government budgeting isn't supposed to be done this way.

It takes 12 spending bills to fund the entire government. But in an omnibus—the type of bill experts are expecting—Congress throws all of those together and just votes once on the whole thing.

This type of rushed, bloated spending bill is guaranteed to include ineffective government programs, giveaways to corporate cronies, and pork projects. And these are not harmless—taxpayers are funding each and every one. This approach will increase spending, waste taxpayer dollars, and raise our national debt.

As Heritage's Grover M. Hermann Fellow Romina Boccia warns, "If there were more time, such red flags would be revealed, increasing opposition to the effort—which is why appropriators are expected to provide as little time as possible between introducing the bill and the final vote."

For lawmakers who have said they can't find any room to cut, Heritage experts have a few ideas. Taxpayers could save $10.2 billion if Congress just got rid of these 10 wasteful federal programs.

Taxpayers need to make it clear that passing bills to see what's in them—like Obamacare—won't fly any more. We expect our elected officials to know what they're voting on—and what they're charging taxpayers for.

The Foundry will be doing its part to highlight the wasteful spending contained in the next budget bill. Heritage experts will be delivering thorough analysis. Don't miss it.

Read the Morning Bell and more en espaƱol every day at Heritage Libertad.

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The post Members of Congress Won't Read This Bill appeared first on The Foundry: Conservative Policy News Blog from The Heritage Foundation.

Swiss court stops handover of tax information to U.S.

Swiss court stops handover of tax information to U.S.
A Swiss court has prevented the handover of information on U.S. account holders to the IRS by the Julius Baer Group Ltd., a Swiss bank (A v. Federal Tax Administration, A-5390/2013 (Fed. Admin. Ct. 1/6/14)).The IRS requested information from the bank on its customers who are U.S. citizens based on

Monday, January 6, 2014

What is the IRS mileage rate for use of a car in business in 2014?

What is the IRS mileage rate for use of a car in business in 2014?
The optional standard rate allowed by the Internal Revenue Service for the business use of a car in the year 2014 is 56 cents per mile. (This is one-half cent less than the rate allowed in the year 2013.) In addition to the 56 cents per mile, you are also allowed to claim an expense for parking fees and tolls that are associated with the business use of your car. The optional standard rate has some restrictions such as the number of vehicles used at one time and the prior use of certain depreciation. An alternative to the optional standard rate per mile is to compute the business portion of the actual expenses for gasoline, repairs, insurance, depreciation, licenses, etc. Further details about the mileage rate and other federal income tax information can be found at

Saturday, January 4, 2014

What is the maximum amount of earnings subject to the Social Security tax in 2014?

What is the maximum amount of earnings subject to the Social Security tax in 2014?
The maximum amount of an employee's 2014 earnings (and a self-employed person's net income) that is subject to the Social Security tax is $117,000. This amount is also known as the Social Security annual limit, wage base, contribution and benefit base, ceiling, tax cap, and maximum taxable earnings. The maximum amount is adjusted annually based on the national average wage index. The combination of the Social Security tax and the Medicare tax is often referred to as the FICA tax. However, there is no annual limit or cap on the earnings for the Medicare tax. In other words, every dollar of wages, salaries, self-employed person's net income, etc. is subject to the Medicare tax.