The Danes and the Swizz

Denmark has officially repealed its so-called “fat tax” after being on the books for only one year.  Also, the Danish tax ministry has announced that it no longer plans to move forward with a sugar tax.  In the final analysis, butter, ice-cream, and pastries are just too good to allow some pesky tax to modify a whole country’s eating habits.  Some believe that Denmark would have had more success had it been more focused in its efforts to improve public health through taxation of targeted foods.  However, if the failed soda tax in some parts of the United States is any indication, a tax on specific foods might not be popular either.

In other news…

Kasseem Dean, a.k.a. Swizz Beatz, may or may not owe millions of dollars in back taxes.  Many media sources have him owing the state of New York $100,000 (an amount that Dean suggests is equivalent to the cost of a flight from Los Angeles to New York — I assume he’s not prone to flying coach). Those same sources report that he is also burdened with a $2.6 million IRS tax problem. But Dean, in a barrage of double negatives vehemently denies he owes any taxes.  Celebrity tax issues are usually publicized after the IRS files a tax lien and in that regard are, at least in part, based on fact.  Most likely what Dean means is he is disputing the assessment, which he has every right to do.

CSEDs – Part II

I have written about CSEDs before.  These are the statute of limitation periods in tax cases; the “Collection Statute Expiration Dates.”  In a previous blog post, I listed what kinds of events can suspend the CSED.  Here I would like to address a couple additional details.

1. Waivers / Extensions (IRM 5.1.19.1)

If you are asked to sign a CSED waiver or extension, you are essentially agreeing to give the IRS additional time (beyond the standard 10 years) to collect the tax from you.  You are giving up the tax relief available to you at the end of the tunnel.  Before the 1998 tax reform, IRS revenue officers were essentially free to secure CSED waivers under any circumstances imaginable.  Also, there were no restrictions on how many waivers could be obtained from the same taxpayer or how far into the future the CSED could be extended.  Today CSED waivers have gone almost completely out of fashion, although some are still obtained in connection with installment agreements as required by law.

2. Substitute for Return (IRM 5.1.19.3.15)

A Substitute for Return (SFR) is an IRS-filed return that leaves out important exemptions or expenses you may be entitled to and may overstate your real tax liability.  Some believe that if a taxpayer goes back and files his own original return, this action automatically resets the CSED for that particular tax year.  This is not necessarily the case.  If the original taxpayer-filed return results in a lower liability, the original CSED remains intact.  And if the original return results in a higher liability, the CSED is updated (extended) only on the additional assessment.  A fine distinction, but an important one nonetheless.

Happy Veterans Day

image via wunderground.com

Technically Sunday was Veterans Day, but most of us have today off, including the IRS. I paid my first visit to the Department of Veterans Affairs website today and here are some of the things I found:

  • VA has guanteed 20 million home loans for veterans since 1944, including 540,000 in 2012 alone
  • VA recognizes award-winning and influential veterans around the country on its website
  • VA supports health care and health education for our nation’s military heroes through some top-rated medical facilities
  • There are 152 VA hospitals and 817 outpatient clinics located throughout the country
  • Every possible type of VA application or form is available with the click of a mouse
  • The “projected veteran population” is over 22 million, most having served in Vietnam
  • The IRS offers free basic tax help for veterans

I like the way we take care of our country’s veterans. Although I have not had ocassion to test the theory, I would venture to guess that the IRS would give some due consideration to veteran status in their collection / tax relief cases as well.

Colorado Can't Tax Pot Sales Without Voter Approval

image via dailycamera.com

On November 6th, Colorado voters approved a constitutional amendment (Amendment 64) legalizing recreational marijuana.  Over 54 percent of voters were in favor of the constitutional amendment, but it would be interesting to know how many of those people are “non-smokers.”  I would guess that a majority of those who voted in favor of legalization were more interested in the “fringe benefits” than they were in getting high with their friends.  For example, now the state’s law enforcement personnel will be able to spend more time on violent crimes rather than small-time drug possession.  Also, now the state will be able to collect an estimated $40 million per year from a 15% tax on marijuana sales.  Or will it?

The Taxpayer Bill of Rights in Colorado prohibits any kind of new tax burden without voter approval.  According to Colorado Attorney General John Suthers, the tax must first be approved by the state legislature and then the voting public.  Perhaps the best way to avoid this tax problem would have been to include precise tax language directly in the pot legalization bill, but for whatever reason, that didn’t happen.

Voters Have Spoken: They Like Their Pot and Soda

image via aolnews.com

Medical marijuana has been legal in California and other states for some time now, but Washington and Colorado are the first states to legalize recreational pot.  Do they realize the tax problems that they will face in the future?  The problems that medical marijuana dispensaries in California have faced time and time again are likely the same problems in store for Washington and Colorado, only on a larger scale.  At the root of the controversy is the fact that the federal government still classifies marijuana as a controlled substance and they will not always turn their head the other way just because the people have passed a state ballot measure.  One of the ways this emerges in the tax world is the “pot shops” are not allowed the same business expenses that other businesses would be allowed, so their tax bills are higher.  At least in California, the IRS has made it clear that there will be no tax relief for pot shops as long as the federal government still sees the drug as a controlled substance.

The Soda

Would a soda tax help reduce obesity?  We won’t know now — soda tax measures were shot down in the California cities of El Monte and Richmond.  Of course soda companies are filthy rich, and they spent an estimated $3.5 million to dissuade voters from passing tax increases on sugary beverages in these two towns.  As with any controversy, there are often attractive arguments to be made on both sides, and the groups with the most money and power are normally better able to get their message out.  At least that’s how the proponents of the soda tax see it.  The opposition (“Big Soda”) sees a soda tax as harmful to small businesses and not the right way to fight obesity.

Shulman Looks Back on His Accomplishments

photo via npr.org

Doug Shulman will be completing his term as IRS Commissioner on November 11, 2012. He spoke to the AICPA in Washington D.C. today. Shulman said that he likes to focus on priorities and not get distracted by crises that tend to crop up. His principal achievements:

  1. Shutting down international tax evasion through voluntary disclosure programs
  2. Softening the “adversarial relationship” between the IRS and corporate taxpayers
  3. Transforming the IRS’ account processing from a weekly cycle to a daily cycle to achieve more real-time processing and analytics
  4. ensuring basic competency for paid tax return preparers by getting them registered and keeping them educated
  5. leveraging data analytics to, for example, vet out tax return preparers who make a habit of preparing inaccurate returns or avoid paying out fraudulent returns
  6. improving the customer service experience when taxpayers phone the IRS seeking tax relief and account-related questions
  7. performing all the other tasks that the IRS is called upon to do (such as the enforcement function of the Affordable Care Act)

 [P]roviding quality customer service is a key priority of mine…and every bit as important as enforcement.

~ Doug Shulman, Commissioner of the IRS

Superstitions helped win the 2012 World Series for the SF Giants

You read it here first on April 6, 2012 at https://www.mwattorneys.com/blog/?p=319; the San Francisco Giants were going to, and did in fact win the 2012 World Series. Thank you to those who did their part to defeat the Dodgers, Reds, Cardinals, and the Tigers. While superstition, as you will read below, will win you a sacred World Series Championship, it will not get you the tax relief you deserve.

Included in those who deserved a World Series Championship and who did their part are of course two time Cy-Young winner Tim Lincecum, the horse Matt Cain, Pablo Sandoval (no longer “strand’em all), ZITTO, all of Giants nation, and of course, the tax attorneys at Montgomery and Wetenkamp.

“How?” you ask, could the IRS tax attorneys at Montgomery & Wetenkamp possibly have played a role in this historic sporting achievement? I will tell you: Like many baseball fans and Giants fans, we are superstitious when it comes to baseball. Some of the pundits, who also picked the Tigers to win, disregard baseball superstition…. Well, don’t disregard the baseball gods. One of my favorite talking heads, Damon Bruce, of the Damon Bruce Show on KTCT 1050 during the playoff run, compared Giants’ fans superstitions to that of a nine year old’s wishes, or something of the like. Well, Damon, even though I am a fan of yours, I will disagree. Additionally, if you paid homage to the baseball gods, maybe your Chicago Cubs would win a title, or two…. like the World Series Champion San Francisco Giants.

So, what superstitions did the tax attorneys at Montgomery & Wetenkamp do to win the ultimate baseball prize? Here is list, beginning well before the playoffs. However, our agreement with the Baseball Gods mandates that we don’t specify beginning dates, or ending dates of any of the listed superstition actions as some overlap and may still be ongoing through the off season:

  • Do not blog excessively about the San Francisco Giants’ dominance of the NL West;
  • Do not rub in Giants’ dominance of the Los Angeles Dodgers to those poor souls who are Dodger fans;
  • Do not wear black SF Giants jersey;
  • Only wear standard SF Giants cap with 2010 World Series patch;
  • Let game watching visitors only enter through the garage;
  • Do not wear game jerseys;
  • Do not change the baby’s clothes (diapers were okay);
  • Wear the same shirt during games;
  • Do not watch games live (use the DVR);
  • Watch the game live with baby on the lap;
  • Sit on the right side of the couch while watching games using the DVR (not live);
  • Don’t watch the game with the baby;
  • Use the San Francisco Giants 2010 World Series Championship beer mug to drink beer during the game;
  • Alternate San Francisco Giants 2010 World Series Championship beer mug with generic San Francisco Giants beer mug to drink beer during the game;
  • Alternate San Francisco Giants 2010 World Series Championship beer mug with generic San Francisco Giants beer mug to drink beer game to game;
  • Drink a beer with corresponding beer mug when the game actually starts, but do not finish. Stop drinking the beer by the time you watch the game on DVR, but keep some beer in the mug until the Giants’ next win…. then drink;
  • Do not let visitors in the house to watch the game in through the garage door;
  • Do not hate on the Dodgers;
  • Superstitions reset series to series;
  • No Visitors;
  • KNBR Radio coverage only – Do not watch the games on television (this was more or less out of necessity given the poor and biased broadcasting by Joe Buck and Tim McCarver. The worst commentators in the history of the game);
  • Wear 2010 National League Championship hat;
  • Wash a car during the game;
  • Wash a car during the game;
  • Do not wash cars;
  • Listen to entire game on KNBR outside (this included a severe rain storm);
  • Only go inside during commercial breaks;
  • Do not go inside ever!!!!;
  • Going inside is okay, only if changing diapers;
  • Do not wear socks or shoes, only sandals;
  • Socks are okay only for half the game… choose the half wisely;
  • There’s no such thing as superstition;
  • Eat standing up;
  • Wear 2010 World Series Championship hat;
  • There’s no such thing as superstition;
  • Do not gloat;
  • Do not eat;
  • Tape the KNBR audio feed in 90 minute increments, then sync up with the game on television using the DVR, then watch with the volume at “3” not muted;
  • There’s no such thing as superstition;
  • Do not gloat;
  • Visitors are Okay;
  • Watch games on the left side of the couch;
  • There’s no such thing as superstition;
  • Make sure that everyone you know, knows that your team won the World Series of Baseball.

Anyone who counted the Giants out was not paying attention to the team throughout the season let alone the post season. Anyways, these were the things the tax relief attorneys at Montgomery & Wetenkamp did to bring a World Series title home…. What did you do to bring the title home? Please comment to let us know…. it takes a village (to win a World Series).

Sandy: Extended Tax Relief

The IRS has expanded the tax relief granted to individuals affected by hurricane Sandy.  This comes as no big surprise given the fact that the IRS had initially given a meager 7 additional days to file employment tax returns that were due on October 31st.  The IRS is now expanding relief categories and extending the deadline to February 1, 2013.  Also, the IRS has now identified specific counties that automatically qualify for relief.

Here is a new breakdown of the types of tax requirements with an extended February 1, 2013 deadline:

  1. Fourth Quarter estimated tax payments for individuals
  2. Third Quarter payroll and excise tax returns
  3. Fourth Quarter payroll and excise tax returns
  4. Form 990 series returns required of tax-exempt organizations

Tax relief is automatic for residents of 4 specified counties in Connecticut, 10 counties in New Jersey, and 9 counties in New York.  The IRS is also demonstrating compassion for people who were indirectly affected by Sandy.  So, if your tax records or your CPA were located in any of the listed counties during the storm, or if you were helping with rescue and relief efforts, you may also qualify for tax relief, but you will need to call the IRS and request it.

When E-Filing Isn't Fast Enough

The IRS always prefers that you file your tax return electronically.  The number of electronically filed returns continues to increase each year, and there is no question about the benefits of E-filing in terms of both accuracy and efficiency.  However, from the perspective of a tax attorney, there are definitely situations when it is better for the taxpayer to drop off a paper return at the local Taxpayer Assistance Center (TAC).

Here is just one example.  Suppose taxpayer has a delinquent 2010 tax return, and now that it is well overdue, the IRS has given him an arbitrary new filing deadline.  If taxpayer misses this deadline, the IRS has promised there will be enforced collection activity, including the possibility of a wage garnishment or bank levy.  If taxpayer finds himself right up against his new filing deadline and he files electronically, the return is not going to show up in the IRS computer system immediately and there could be trouble.  Even if the return is filed before the deadline, the IRS won’t know it, and it could quickly shut down negotiations for tax relief.  However, if taxpayer walks his return down to the local TAC, he can get the return date stamped as “received” and, providing a copy of that date-stamped return as proof, can more expeditiously get the IRS to back down on the levy threats.

At the core of this problem is the fact that the customer service people at your local TAC are ordinarily not the same people who process the returns.  The TAC people will normally have to ship returns they receive off to processing centers.  Practitioners who drop off stacks of returns at local TACs tend to overburden these walk-in offices, which can diminish the level of service given in truly urgent situations like the one described above.  The IRS is trying to eliminate this practice.  Beginning this year, the IRS will no longer accept bulk return filing at its Assistance Centers.  This will be the general rule; exceptions will be considered on a case-by-case basis.

International IRS Offices

US citizens and resident aliens must report their worldwide income, meaning income from all sources within or outside of the United States.  The IRS receives tax filings and payments all year round and from all over the world.  If you derive income from sources in either Frankfurt, London, Paris, or Beijing and happen to be working there too, you have the fortune (or misfortune if you have an unpaid tax debt) to have an international IRS office nearby.

I would normally not recommend dropping in at a local IRS office.  You can usually get what you need more quickly, and with less hassle, by using the IRS’ website or by calling and speaking with a customer service representative if you don’t have a tax attorney.  However, if I worked in one of these four cities, I might give the international office a try.  They are located inside the United States embassies (or consulate in Frankfurt) and I would bet they do not get a lot of foot traffic.  Be sure to check the hours of operation here because they vary office to office, or visit the individual offices for more information:

image via lib.utexas.edu

Frankfurt

London

Paris

Beijing