IRS Crashes Party at Fiesta Bowl

The Fiesta Bowl is scrambling to avoid needing tax relief. The Fiesta Bowl, a non-profit organization, is facing Internal Revenue Service (IRS) scrutiny for giving elected officials expensive gifts since 2002, which may not have served the Fiesta Bowl’s tax-exempt purpose. Presently, the Fiesta Bowl, because of its non-profit status, does not have to pay federal or state income taxes. However, if such gifts were not in furtherance of the Fiesta Bowl’s tax-exempt purpose, the IRS may levy a fine or may revoke the Fiesta Bowl’s non-profit status. Therefore, the Fiesta Bowl is now seeking information from gift recipients that such gifts were indeed proper, or it is seeking a monetary reimbursement for its “gifts”. Fifteen elected officials have since amended their financial disclosure reports to reflect gifts received from the bowl.

Taxpayer Advocate Wants More Money Spent on Collections

Shouldn’t the Taxpayer Advocate be focused on providing high quality tax relief within the bounds of the law?

The Taxpayer Advocate Service (TAS) describes themselves as an “independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should. ”

Today the TAS submitted its biannual report to Congress which evaluates IRS’s progress in 2010 and spells out its objectives for 2012. Here are some key points:

  • IRS resources are being strained due to new programs and less funding. New programs have resulted in higher call/inquiry volumes and there is less money available to pay for employees to field these calls and question.
  • TAS praises the IRS for making improvements to lien filing procedures, but does not believe it is doing enough. TAS suggests that the IRS cease filing liens based on amount owed, and instead look at the individual ability to pay. If the taxpayer is suffering from an economic hardship, no lien should be filed.
  • Dwindling resources resulted in more “bright-line” tests used by IRS employees; in other words, less discretion and less consideration of taxpayers’ individual circumstances.

The TAS also cited an interesting statistic: In 2010 the government spent $12.1 billion to run the Collections Department of the IRS, and that department collected $2.35 trillion in revenue (that’s $194 for each dollar spent). The TAS cited this statistic to show just how successful the IRS is in collecting taxes and to make their case for increased funding for these collection efforts. In fact, the TAS wants the IRS to be exempt from budget caps or reductions.

In my opinion, the TAS’s push for more funding seems inconsistent with their stated goal of looking out for the best interests of the taxpayer. What kind of advocate would be so interested in beefing up Collections?

Another Tax Bust

Due in part to the state of our economy, there are many people who don’t pay their taxes because they can’t afford to pay. Many of these people can find the tax relief they are looking for by enlisting the assistance of a CPA or tax attorney. However, the IRS seems to be very interested in pursuing criminal charges lately. The IRS has been known to make an example of a few high-profile cases to encourage compliance with the tax laws among average citizens. Here is yet another example:

Identity: Arvind Ahuja, Wisconsin neurosurgeon

Offense: 4 counts of hiding money in offshore accounts & 4 counts of filing false tax returns

Amount of Money Involved: $8.7 million in accounts & $1.2 million of unreported interest income

Other Players: HSBC India has helped other clients like Ahuja hide funds offshore

More Info: USA v Arvind Ahuja, No. 11-cr-135, in U.S. District Court for the ED-WI

IRS Seizes Super Bowl Ring

Even pro football players need tax relief from time to time. Fuzzy Thurston, former Green Bay Packers lineman, owes $1.7 million in back taxes and now the IRS is auctioning off his ring from Super Bowl II to help pay what he owes. His tax debt originated from a restaurant chain he started after his football career had ended. He failed to turn over payroll taxes he withheld from his employees income. Thurston also has a ring from Super Bowl I that the authorities are trying to track down. However, rings like his are worth a mere $20,000 – $30,000, so the IRS would have to locate about 50 such rings to bring him into full compliance.

Kenya Revenue Authority Cracks Down on Government Officials

Despite only having been in existence since 1995, the Kenya Revenue Authority (Kenya’s equivalent of the IRS) apparently has some teeth. Under the country’s new constitution, which was promulgated in August 2010, even the top paid legislators have to pay taxes. Imagine that! So Kenya’s prime minister, Raila Odinga, is leading by example and paying what he owes in back taxes which came out to over $37,000. But many other lawmakers are not so excited about following suit, and some flat out oppose the rule. The Revenue Authority stated that it would seize their property and sell it at auction if they fail to pay what they owe.

Dodgers Bankruptcy

The Los Angeles Dodgers filed for Chapter 11 Bankruptcy protection today.  MLB Commissioner recently rejected a $3 billion deal with Fox that may have helped pull the club out of its $630 million in debt. The Commissioner did not approve the deal, saying it was self-serving for the Dodger’s owner and not in the best interest of the Dodgers or its fans. Some of the unsecured creditors are actually former players, including Manny Ramirez whom they owe nearly $21 million. According to Forbes, the Dodgers franchise is MLB’s third most valuable franchise, worth an estimated $800 million.

Even though the team insists that the bankruptcy will in no way affect the salaries and benefits of their players, it is hard to imagine that this won’t get in their heads and in some way affect their play. It certainly can’t help as they find themselves struggling with a winning percentage of .443 and 9.5 games behind the leading team in the NL West. By the way, who is that leading team?

IRS Interactive Tools

IRS.gov offers a couple different interactive tools designed to help with basic tax questions. One is called the “Interactive Tax Assistant” (ITA) and the other is called “Tax Trails.”

The ITA covers a limited range of topics:

  • Do I Need to File a Tax Return?
  • Who Can I Claim as a Dependent?
  • How Much Can I Deduct for Each Exemption I Claim?
  • What is My Filing Status?
  • How Much is My Standard Deduction?
  • Am I Eligible for the Child Tax Credit?
  • Am I Eligible for the Making Work Pay Credit or Government Retiree Credit?
  • Is My Pension or Annuity Payment Taxable?
  • Are My Social Security or Railroad Retirement Tier I Benefits Taxable?
  • Do I Have Cancellation of Debt Income on My Personal Residence?

The ITA topics are interactive in that they take the user through a series of questions, and the answer varies depending on the information furnished.  The user is never required to enter a social security number.  There is an ITA search box too, but I have not found that it generates good results.  Most of the time it either takes the user to the Tax Trails tool or it reverts to the general IRS search box that opens up the search to the entire IRS website.  Tax Trails has about twice as many topics as ITA.

Summer School

If you’re worried about your kid’s brain turning to mush over summer vacation, how about a free online tax course?  The IRS’ Understanding Taxes program is perfect for high school or college aged youngsters.  The course offers 24 lessons divided into 6 themes dealing with tax history and tax theory (the “Hows” of taxes).  And there is a separate set of 14 lessons dealing with the application of tax principles (the “Whys” of taxes).  The Understanding Taxes program includes activities, tutorials, fact sheets, simulations, and of course, every kid’s favorite: assessments.  This is one way to keep them on their toes until they return to school in the fall.

U2 Scorned for Tax Dodging

Activist group, Art Uncut, has planned a protest during U2′s performance at this weekend’s Glastonbury Festival in England.   The group has not said exactly what actions they will take to make their point.

Most people looking for tax relief don’t have the liberty of selecting which country they want to pay taxes in.  But in 1996 U2 went shopping around with the intention of moving their business affairs to a country with lower taxes, and they landed in the Netherlands.   Art Uncut’s position is that this “tax dodging,” (by U2 and others) although not illegal, is causing poor countries like the band’s native Ireland to grow even poorer.  Furthermore, it is their view that this move really undermines frontman Bono’s highly publicized campaigns aimed at reducing poverty in developing nations.

Interestingly, Forbes recently placed U2 at the very top of their list of highest paid musicians, earning $195 million over the relevant 12 month period.