IRS May be Levying you in their Underwear

The IRS has expanded its use of a wireless and remote access technology over the past several years, allowing employees to access the IRS Network from airports, hotels, their homes . . . anywhere. While it’s interesting to think of the IRS revenue officer sitting at home in his boxers in front of the TV sending out wage garnishment notices and lien letters, the more noteworthy issues here are (1) the efficiency of wireless technology and (2) the security issues it poses for the American taxpayer. The IRS really has to balance these competing values and TIGTA has stepped in recently to help do some balancing.

Today TIGTA released an audit report giving mostly positive marks to the IRS wireless activities. The IRS has adequate controls in place that monitor whether or not the secure network has been breached, and these controls are functioning properly. However, some IRS employees have been accessing the wireless network from unauthorized wireless devices (personally owned USB wireless adapters).

Landlords are on Frontlines of Pot War

Federal prosecutors are shutting down California pot dispensaries with the efficiency of a nuclear bomb.

Instead of chasing around the dispensary operators, they are focusing on those who lease commercial spaces to them. Even though California legalized marijuana for medicinal purposes 15 years ago, the federal government still considers it a controlled substance. And landowners are subject to federal law which prohibits any owner, lessee, agent, employee, occupant, or mortgagee, to knowingly and intentionally rent, lease, profit from, or make available for use, with or without compensation, any place for the purpose of unlawfully manufacturing, storing, distributing, or using a controlled substance. Title 21 U.S.C. Section 856(a).

And what are the consequences for violating 856(a)?  Forfeiture of the property to the federal government. Furthermore, violating federal law is a felony and carries a penalty of up to 40 years in prison. Each new forfeiture action serves as a strong deterrent for other property owners around the state.  Full story here.

Law Targets Government Contractors with Tax Debt

A law enacted in 2006 would have required governments at the federal, state, and local levels to withhold 3% of money owed to contractors with even the slightest federal tax debt.  The law is kind of in limbo at this point: it is slated to go into effect in January 2013 but lawmakers, including President Obama, are pushing to get it repealed. And it looks like it is going to be repealed despite data highlighting the widespread non-compliance of government contractors.

Arguments for the law:

  • Businesses should not be awarded lucrative government contracts if they are not going to pay their taxes.
  • It is needed to pay for Bush-era tax reductions.

Arguments against the law:

  • It assumes every government contractor is a tax cheat.
  • It will cripple some small business who simply can’t float the 3%
  • Contractors may pass the costs on to the government.
  • It would be difficult and expensive to administer.
  • Job protection is more important right now.

I have not seen the text of this legislation, but if it would require that government contractors fully pay their tax bill before getting fully paid by the government, then it seems that would also apply to contractors on installment agreements. Some installment agreements last 5 years or longer, so they would have a long time to wait for their remaining 3 percent!

Perry’s Tax Reform Plans

Republican presidential candidate, Rick Perry, is trying to set himself apart from the other candidates with his bold tax reform talk.  He wants to dramatically reduce taxes, and with that would come deep cuts in government funding and government programs.  Key points of Perry’s plan:

  1. eliminate taxes on Social Security benefits
  2. eliminate estate taxes
  3. eliminate taxes on dividends & capital gains
  4. popular deductions remain in tact
  5. $12,500 personal exemption plus $12,500 for each dependent

Under Perry’s plan, we would get to chose between paying a 20% flat tax or paying under the current system.  Those who oppose this proposal say that the wealthy taxpayers in our country would chose the flat tax and enjoy huge savings, everyone else would stick with the current tax system and pay what they are paying now, and there wouldn’t be near enough revenue for the government to continue operating.

Tax Reform Buzz

Some great soundbites in the news today:

If you have a dramatic change in the tax structure at the federal level it’s going to upset the apple cart in every single state in one way or other, so it’s a tsunami.

~ Joan Wagnon,

GOP presidential hopefuls each have their own idea of what needs to be changed about the current tax system.  And each claims to know the effect their changes would have, whether it be tax relieffor the middle class or if there will be sufficient revenues to run the government.  But according to Wagnon, they’re just guessing (or hoping):

The trickiest question of any proposal is whether you are going to be able to replace all of the income tax and make up the same amount of revenue. It’s impossible to know.

Politicians also talk of abolishing the tax code and eliminating the IRS, but is this realistic?

You’re still going to have a white building with lawyers and accountants. They’re still going to do audits and there’s still going to be complexity to it.

~ Matt Schlapp, Cove Strategies

Defending the Red Rabbit

The Sacramento Metropolitan Arts Commission has provided some additional perspectives regarding the big red $800,000 rabbit housed in the new terminal at Sacramento International Airport.  The piece has received mixed reviews and perhaps they have felt the need to defend the poor thing.  Here are their explanations in a nutshell:

  • not typically what people think of when they think of Sacramento (perhaps trying to abolish the image of a cowbell?)
  • the commission believed it would create buzz for Sacramento (that it has certainly done)
  • iconic, fun, whimsical (“whimsical” is just a nice way of saying “arbitrary, pointless”)
The artist is Lawrence Argent, and he too is sticking up for his work:
  • red = Ferrari = speed (perhaps suggestive of the velocity by which passengers will depart the terminal when they catch sight of the artwork?)
  • many stories from different cultures are associated with the rabbit (more on this below)
  • playing around with the idea that something has come from the outside and leapt into the building
Maybe if we look at the famous rabbits we already know or the traits that rabbits have come to symbolize, we can come to understand “Leap” a little better.
Rabbits as Cultural Icons:
  • childhood, purity (i.e., Peter Rabbit)
  • sexuality (i.e., Playboy Bunnies)
  • fertility
  • mischief
Famous Rabbits:
  • Bugs Bunny
  • the March Hare
  • Br’er Rabbit
  • the Trix rabbit
  • Peter Rabbit
  • Roger Rabbit
  • Thumper
  • Duracell Bunny

World Series of Tax Reform

On October 22, 1986, President Ronald Reagan signed into law the most sweeping tax reform in United States history.  At the conclusion of his speech he said:

I feel like we’ve just played the World Series of tax reform, and the American people won.

Its been 25 years, so maybe we’re due for another win.  The consensus these days is that the tax code is a mess and we need to start over again.  But there are nearly as many opinions as there are pages to the code.  Here are just a few.

California’s New and Improved “Top 250 List”

Normally “first place” is a position that many aspire to.  Unless you occupy the first spot on California’s Top 250 Delinquent Taxpayers list.

California tax collectors (employees of the Franchise Tax Board) have a reputation for being, how shall we say this, . . . very zealous in their duties.  The FTB stops at nothing to collect overdue taxes, even rivaling the efforts and tactics of the IRS.  One of the ways California encourages tax compliance is by publishing its annual “Top 250 Delinquent Taxpayers” list on its website as a type of public shaming exercise.  Right now the winners are Halsey & Shannon Minor of Los Angeles who owe exactly $14,247,341.09 in personal income taxes.  Apparently nobody in the entire state of California owes more state taxes than they do.

But even if you’re at the bottom of the list, the consequences are the same.  And now, with the passage of AB 1421, it’s more than just the tax bill and the shame. Consequences now include having your drivers license, and possibly professional license, suspended.  Also, the list will be doubled so that it includes the top 500 worst offenders.  The author of the bill, Henry Perea, has strong words for California’s top 500:

Everyone on this list has had a chance to work with the state to resolve their tax issues but have chosen instead to bury their heads in the sand and continue to spend lavishly.

But I wonder how accurate that statement is.  According to the FTB website, the only criteria for inclusion on the list is that the taxpayer owes over $100,000 and falls into the top 250 (now 500).  The oldest tax liens were filed in 1996, but many of them were just filed last year.  At any rate, California has sent a clear message to the wealthiest taxpayers in the elite neighborhoods of LA and San Francisco.  Now they should try to get that message to the masses to make it really effective.

CA Medical Pot Crackdown: AG Gives Her Two Cents

A few weeks ago, Washington bullies swept in on California’s medical marijuana playground, intent on shutting them down permanently.  Today in comes Big Sister to see if she can break up the fight a bit.  CA Attorney General, Kamala Harris, issued a statement warning the feds to show some restraint:

an overly broad federal enforcement campaign will make it more difficult for legitimate patients to access physician-recommended medicine in California

The question is whether a focused approach will be sufficient to curb the “proliferation of gangs and criminal enterprises that seek to exploit the medical marijuana law.”

IRS May have to Make Do with Less in 2012

In difficult financial times, individuals are forced to take a good hard look at every single expense to make sure it is necessary.  And in the federal government, it’s no different.  Lawmakers are looking across the board at every service, program, committee, and agency.  Expenses that cannot be eliminated will be reduced as much as possible, . . . and rightly so.  Right?

What about expenses that generate revenue?  Should there be an exception?  IRS Commissioner Douglas Shulman believes that not all government expenses are created equal.  He believes that his agency should be treated differently.

The House Appropriations Committee has recently approved proposed legislation that would cut funding to the Internal Revenue Service by $600 million for fiscal year 2012 and Shulman is up in arms about it.  He has some bold words:

[T]hese budget cuts will result in a direct increase to the nation’s deficit.

~ Douglas Shulman, Commissioner of the IRS

Nice soundbite at least.  Here’s what he thinks will happen if we cut funding to the IRS.

  1. reduction in service
  2. reduction in revenue collected
  3. negative impact on voluntary compliance for years to come

As for a potential “reduction in service,” Shulman says that, in some instances (if the budget cuts are approved), it would take 5 months for the IRS to respond to taxpayers’ written inquiries and only half of those telephoning the agency would get through.  Resolution of back taxes would be slowed significantly.  I don’t know, maybe Shulman should welcome these cuts — it would allow his agency to continue providing low quality service, except now they would have a good excuse.  Read Shulman’s full letter here.