kcjenkins

Shame on you, Jack. You surely know Atticus well enough to know when he's being sarcastic? Especially when you read his second and third paragraphs.

Did not realize you'd posted this, or I would not have also posted this. Maybe a slightly more descriptive title?

Also, many States take the position that credit is allowed only for taxes “properly due” another state. Thus, the fact that income tax was paid to another state may not preclude an argument over whether the tax was “properly due.” A possible 'double whammy' even if there was no SOL issue. NY & CT are the classic case.

I'm wondering about the residency issue, too. NY is notorious for their aggressive stance on residency, so that even if you don't own anything in NY, if you live there for a significant portion of the year, you are taxed there as a 'statutory resident'. Here's a link to a very interesting description of some of NY's tax positions. http://taxprof.typepad.com/taxprof_blog/2011/06/zelinsky-nys-.html Also, here's a good Am. Bar Assoc. piece on the residency issue http://www.americanbar.org/content/dam/aba/events/taxation/taxiq-fall11-weintraub-home-paper.authcheckdam.pdf

Guilty. That was the plea today from 29 year old Elian Matlovsky of Staten Island, New York. Matlovsky was one of 14 defendants initially charged in a scheme that authorities described as “one of the nation’s largest and longest running stolen identity tax refund fraud schemes.” Under the scheme, Matlovsky and the other defendants are alleged to have filed more than 8,000 fraudulent U.S. income tax returns seeking more than $65 million in tax refunds. Law enforcement agencies accused the defendants of stealing personal identifying information, including Social Security numbers and dates of birth, and using that information to file false returns claiming refunds. The Social Security numbers were largely obtained from U.S. citizens who reside in the Commonwealth of Puerto Rico. Residents of Puerto Rico are generally entitled to a Social Security number but most do not have to file federal income tax returns unless they have income from the states. Since those numbers are otherwise not being reported to the Internal Revenue Service, this means that fraudsters can file returns undetected for some time. To avoid detection, the fraudsters purchased lists of addresses covered by a single mail carrier. Those addresses were used for as mailing addresses for the returns: towns targeted in the scheme included Nutley, Somerset and Newark, New Jersey, and Shirley, New York. When the returns are processed and the checks are issued, the fraudsters work to steal the checks and convert the refunds to cash. Matlovsky was accused of opening several bank accounts at Wells Fargo and Chase in order to deposit checks. After divvying up the proceeds with her co-conspirators, she spent some of the cash herself to support a more lavish lifestyle than her teaching salary would allow. Her purchases included tens of thousands of dollars on luxury vacations to spots like Cancun, Miami Beach and Israel, and thousands of dollars to eat out, including one meal with a $1,300 tab. To combat the tax refund fraud, law enforcement agencies put together a multi-agency task force. The task force included investigators from the Internal Revenue Service – Criminal Investigations, the U.S. Postal Inspection Service, the U.S. Secret Service and the Drug Enforcement Administration (New Jersey Task Force). As a result of their efforts, an indictment was handed down against Matlovsky and two co-conspirators, Robert Diaz and Ennio Guzman. Matlovsky pleaded guilty to one count of conspiracy to defraud the United States and one count of theft of government property. Her sentencing is scheduled for November 19, 2014. She faces up to five years in prison and a $250,000 fine for the conspiracy charge and up to 10 years in prison and a $250,000 fine for the theft of government property.

Banks Claim Millions in Tax Credits Intended for Poor Communities Washington, D.C. (August 11, 2014) By Michael Cohn Big banks and wealthy investors are accused of benefiting from a tax credit program that is supposed to help poor communities, according to a new Senate report. The report, from Sen. Tom Coburn, R-Okla., describes how millions of dollars in New Markets Tax Credits are being diverted to benefit billionaires, major banks, Hollywood producers and fast food chains. The program is supposed to spur new markets in struggling communities, but Coburn said it is instead subsidizing companies and corporations that have little need of taxpayer assistance, providing financing for projects such as a sculpture in the desert, a vintage car museum, and pet care centers. In at least one case, a project supported with a New Markets Tax Credit is threatening to bankrupt an entire town and eliminate jobs, including the entire police department. “The New Market Tax Credit is a reverse Robin Hood scheme paid for with the taxes collected from working Americans to provide payouts to big banks and corporations in the hope that those it took the money from might benefit,” Coburn said in a statement Monday. “When government picks winners and losers, the losers usually end up being taxpayers. Washington should reduce federal taxes on working Americans and all business owners who create jobs by eliminating tax earmarks, loopholes and giveaways like the New Markets Tax Credit.” The New Markets Tax Credit program was expected to steer private financing into low-income communities to help create jobs. Yet, virtually every neighborhood, from Beverly Hills to the Hamptons, could qualify for the program, Coburn noted. “As a result of the definition of qualified low-income communities, virtually all of the country’s census tracts [neighborhoods and communities] are potentially eligible for the NMTC,” according to a report from the nonpartisan Congressional Research Service. While some of the projects are well intended, such as health clinics, Coburn acknowledged, it is difficult to measure if the tax credits are helping those who are seeking a hand up or simply subsidizing banks, corporations and others companies that are already succeeding. The tax credit is intended to benefit the poor but is instead benefiting big banks and other private investors that claim more than $1 billion in NMTC annually. These include JP Morgan Chase, Bank of America, Goldman Sachs and Wells Fargo, among others. The program duplicates over 100 other federal economic development efforts. There are at least 23 community development tax expenditures costing taxpayers over $10 billion annually and 80 overlapping discretionary programs costing $6.5 billion annually, 28 of which are specifically designed to spur growth in new markets. Because of this redundancy, many projects and corporations are double-dipping on taxpayers—receiving multiple federal subsidies through other grant programs and tax giveaways. In addition, it is unclear which of these best meets the overlapping goals, or if any of them spur more economic growth than policies encouraging private investments that do not spend taxpayer money. A separate Government Accountability Office report that was issued Monday was also critical of the New Markets Tax Credit program, revealing that fees charged by Community Development Entities reduced the amount of assistance provided to low-income community projects by $619 million (7.1 percent) from 2011 to 2012. A majority of NMTC-financed projects used more than one source of public funding, even though the purpose of the tax credit is to leverage private investment. The GAO found that 62 percent of NMTC projects received other public funding from 2010 to 2010. One-third of NMTC projects received other federal funding, while 21 percent of NMTC projects received funding from multiple other government programs. In many cases, investors were able to claim the tax credit on the equity provided by the other public sources. The NMTC has subsidized wealthy investors in nearly 4,000 projects, including car washes, bowling allies, parking lots and breweries, according to Coburn’s report. Many of these are not a federal priority—such as an ice skating rink and a car museum—while others help corporations with little need of taxpayer handouts, including food and beverage chains such as Subway, IHOP and Starbucks. One of the program’s projects is threatening to bankrupt the city of Desert Hot Springs, Calif., where the cost to maintain the wellness center established with NMTC support has prompted across-the-board salary cuts and city officials are even considering elimination of the police department. Tens of thousands of dollars intended for the financially challenged clinic were spent to create a sculpture in the desert. In another project in an area of Atlanta where condominiums sell for millions of dollars, NMTCs are being used to expand the world’s largest aquarium, according to Coburn’s report. “With ticket prices costing nearly $65 for a 15 minute show, the real beneficiaries are SunTrust Bank, Wells Fargo and the Emmy-award winning producers and Hollywood ensemble hired to develop the show, and of course the dolphins who live in the larger aquarium.” Defending the NMTC The spokesman for a business group that lobbies for the credit, the New Markets Tax Credit Coalition, disputed the findings of both Coburn’s report and the GAO report. “Washington doesn’t pick the winners and losers when it comes to the NMTC,” said Bob Rapoza, spokesperson for the NMTC Coalition. “It is a market driven program based in a philosophy that communities know best, they just need access to capital. Through public-private partnerships, the credit brings community revitalization projects to fruition that likely would not have gone forward if not for NMTC financing.” He pointed to an earlier report in which the GAO found that 88 percent of investors would not have made their investments, but for the incentive of the credit, along with data from the Treasury Department indicating that the NMTC has delivered more than $60 billion in capital to businesses and revitalization projects nationwide in some of the poorest communities. These investments, Rapoza noted, have generated over 550,000 jobs and of the 74,134 census tracts in America, only 30,099 (41 percent) qualify. In addition, according to the NMTC Coalition’s survey of 2013 NMTC projects, 80 percent of investments went to severely distressed census tracts that far exceed the statutory requirements for investment. Rapoza noted that Coburn’s report profiled 19 projects to which it objected, but analysis of the profiles of those communities indicate they are among the poorest in the country, with an average poverty rate of over 32 percent and an unemployment rate of 11.7 percent at the time the project was financed. In these communities, the NMTC delivered $770 million in financing and created over 7,700 jobs. “The hallmark of the credit is its flexibility, which allows for diversity in projects based on needs and opportunities identified by citizens and local leaders—the vast majority of which include child and health care facilities, grocery stores, and manufacturing facilities,” said Rapoza. The coalition also took issue with the GAO report, saying it ignores the challenges of investing in low-income communities and the success that the NMTC has in spurring revitalization in urban neighborhoods, small towns and farming communities. The group claimed the GAO did not provide an accurate analysis of the operations of the NMTC. In one such case, the GAO overestimated an investor return by 400 percent through faulty analysis. In this case, according to the NMTC Coalition, the authors of the GAO report used incomplete information based on one example in a second-party report that they could not independently verify. Thus, the GAO report implied that the financial structures used in NMTC transactions allow investors to receive an unduly large return on their investments, claiming a 24 percent annual return to the investor, when actual NMTC investor returns align with market rates of 6 to 7 percent annually, according to the coalition’s figures. “Unfortunately, some conclusions are based on misinterpreted data and flawed calculations,” said Rapoza. “The Coburn report builds on those errors to cast a sensationalized and inaccurate portrayal of the NMTC.”

Art of Accounting: Break-even Analysis August 8, 2014 By Edward Mendlowitz One of the best tools to evaluate a business and get a quick handle on the knowledge of the owner or manager is the break-even analysis. Break-even analysis is a simple calculation that tells how much sales are needed to break-even, and how much will be lost or earned when sales fall short of that amount or exceed it. A key part of this is to determine the “product lines” a business has and its direct cost structure. A simple explanation is to imagine a bar and restaurant. There are two basic product lines—liquor and food. Generally the direct costs for the bar are around 20 percent and the food around 35% percent. If bar sales are 40 percent of the total and food 60 percent, we can then get a weighted average of sales. This information can be applied to almost any business. Now, how I get this information is very insightful to me. I get it over lunch with my client—primarily new clients—and write it on a napkin. I believe most owners or managers should understand and have a handle on the product lines and the approximate direct costs. Most do, but some do not. I am appalled when clients do not have a clue about this information. This tells me a lot about them and how the business is being managed—it isn’t. I then draw up a proposal to provide a methodology for helping them get a better grasp and establish controls. For those that know, I test what they told me and then complete the B/E analysis for them. It then becomes one of their management tools. The more knowledgeable the client, the better it is to work with them. Edward Mendlowitz, CPA, is a partner in WithumSmith+Brown, PC, CPAs. He has authored 20 books and has written hundreds of articles for business and professional journals and newsletters plus a Tax Loophole article for every issue of TaxHotline for 27 years. Ed also writes a blog twice a week that addresses issues his clients have at www.partners-network.com. He is the winner of the Lawler Award for the best article published during 2001 in the Journal of Accountancy. He has also taught in the MBA graduate program at Fairleigh Dickinson University, and is admitted to practice before the U.S. Tax Court. Ed welcomes practice management questions and he can be reached at WithumSmith+Brown, One Spring Street, New Brunswick, NJ 08901, (732) 964-9329, [email protected].

Robert Redford Sues New York over $1.6M Tax Tab for Selling Sundance Channel New York (August 8, 2014) By Michael Cohn Actor Robert Redford has filed a lawsuit against the state of New York for billing him $1.6 million in taxes related to the sale of the Sundance Channel, claiming he already paid taxes to the state of Utah. Redford sold part of his share of the cable TV channel in 2005. New York State’s Department of Taxation and Finance claims he owes a total of $1,568,470 for that tax year, which includes $845,066 in unpaid taxes and $727,404 in interest. However, Redford sued, saying he already paid taxes in Utah, according to Courthouse News Service. In his lawsuit, Redford is reportedly seeking “a declaratory ruling on a pure question of law concerning the constitutionality of imposing on plaintiff, a nonresident of the State of New York, a personal income tax on the gain derived from the sale of an ownership interest in a limited liability company.” The lawsuit contends that since Redford’s ownership interest was in an S corporation, which is a pass-through entity, so he paid the taxes on his individual return in Utah and should not be subject to double taxation. The lawsuit argues that the entity operated from Utah and he had no property, payroll or receipts in New York. Redford and his partners at NBCUniversal and CBS sold the rest of the Sundance Channel in 2008 to Cablevision’s Rainbow Media unit, which later spun off and became AMC Networks, according to the Hollywood Reporter. The channel, which was named after the Sundance Film Festival that Redford founded in Utah and his co-starring role in the 1969 Western, "Butch Cassidy and the Sundance Kid," is now known as SundanceTV.

This cute little pup isn't content with swimming on by while the surfers have all the fun. He swims right up to a couple of guys in the water and tries to join in.

What type of trust?

Glad to hear that a lawsuit has been filed. That sort of regulatory overreach should be fought whenever found.

Of course they can, if they want to. They have your PTIN on every return, after all.

I've been there, done that, and totally agree with you. There is something especially satisfying about putting wood on the fire that you cut, split, and stacked yourself. Just feels a little warmer than 'bought' wood, doesn't it?

TimeValue Software has a great program for the interest/penalty calcs. Or if you don't want to spend the 150, follow Jack's advice. http://www.timevalue.com/products/taxinterest/overview.aspx

If I knew of such a link, I'd never give it to a client. They don't know enough tax law to understand the full repercussions, that's what they need us for. Think for a minute about TurboTax and how often we get new clients when the t/p has screwed up using that. It's not a bad program. It's the user not really understanding some of those easy 'questions' that cause their problems.

i WOULD FILE IT, OTHERWISE IN ANOTHER YEAR OR TWO HE'LL BE GETTING A CP2000.

cute

August 6, 2014 By Mike Trabold In addition to overseeing the daily operation of their business, small business owners rely on accountants to provide guidance on how to comply with changing rules, regulations and laws on the state and federal level. One of the most important issues on the mind of these business owners is the Affordable Care Act and its Employer Shared Responsibility provision. Due to the implementation timeline of the ACA and some of the delays to provisions like ESR, there is a lot of confusion among those in the business community and many will look to their accountants for answers. As such, Paychex is providing the top three ESR questions we have received from business owners and the responses we recommend. When does the Employer Shared Responsibility provision go into effect? • Originally set to take effect Jan. 1, 2014, the U.S. Treasury Department announced a one-year delay in the enforcement of the ESR provisions in July of 2013. Final guidance, released Feb. 10, 2014, gave an additional year of transition relief from penalty assessments to certain employers. • For employers with 100 or more full-time employees, including full-time equivalent employees, enforcement begins Jan. 1, 2015. For qualified employers with 50 to 99 full-time and FTE employees, the assessment of penalties has been delayed until 2016. • To qualify for this transition relief, these employers must meet certain conditions. They must not reduce workforce size or hours after Feb. 9, 2014 to stay under the 100-employee threshold. They must not eliminate or materially reduce health coverage offered as of Feb. 9, 2014, and they must certify they met qualifications for this relief in Section 6056 ESR reporting. • If they don’t qualify, they will be treated the same as employers with 100 or more full-time and FTE employees and may be subject to penalties beginning in January 2015. For ESR, what is required to be reported to the Internal Revenue Service? • As part of the final guidance released by the Treasury Department on ESR end-of-year reporting, applicable large employers subject to ESR will be required to provide information as to whether they offered full-time employees and their family members the opportunity to enroll in insurance that provides minimum essential coverage. • Forms 1094-C and 1095-C must be filed by the employer with the IRS. Additionally, employers must provide Forms 1095-C to their full-time employees, similar to how Forms W-2 are provided. • Simplified reporting methods are available under certain circumstances. One of these methods is designed for employers with 50 to 99 full-time employees to allow them to certify that they qualify for ESR transition relief in 2015 and some months in 2016 in certain cases. When do employers subject to ESR reporting requirements need to file information with the IRS? • Small business owners need to file Forms 1094-C and 1095-C with the IRS each year, no later than February 28, or if filing electronically, by March 31 following the end of the calendar year for which the return applies. • Applicable large employers must provide Forms 1095-C and employee statements to full-time employees on or before January 31, following the end of the calendar year for which the statements apply. Accountants have an opportunity to provide added value to clients by guiding them through the challenges of health care reform. From determining how a business could be affected by ESR to helping them report the proper information with the IRS, accountants play a significant role in helping businesses avoid penalties and comply with the law.

I also think it's OK to post from any source that leads to thought on the subject, Jack. That is the real goal. I post things I don't fully agree with, fairly often, to alert the members to something, or to gain feedback from people who I respect. i.e. the members here. BTW, I fully agree when you say

SOME COMMENTS IN ACCOUNTING TODAY ON THIS ARTICLE:

Washington, D.C. (August 7, 2014) By Michael Cohn President Barack Obama put the blame on accountants for the wave of companies doing tax inversions. During a press conference Wednesday following a summit with African leaders, Obama said, “You have accountants going to some big corporations—multinational corporations but that are clearly U.S.-based and have the bulk of their operations in the United States—and these accountants are saying, you know what, we found a great loophole—if you just flip your citizenship to another country, even though it’s just a paper transaction, we think we can get you out of paying a whole bunch of taxes.” In contrast, an article in The Wall Street Journal on Wednesday attributed the trend to the legal profession, describing how the international law firm Skadden, Arps, Slate, Meagher & Flom persuaded a number of corporate clients to do inversions, with the help of banks such as J.P. Morgan Chase and Deutsche Bank. So far, many of the deals have occurred among pharmaceutical companies such as AbbVie's recent acquisition of Shire in the United Kingdom. On Wednesday, Walgreen's CEO announced that his company plans to acquire the rest of the European drug store chain Alliance Boots, but its tax address will remain in the U.S. Obama argued that inversions place an unfair burden on other taxpayers. Obama pointed out that there is a bill in Congress that would help prevent inversions, but he said his administration is also looking into what it can do. “So there is legislation working its way through Congress that would eliminate some of these tax loopholes entirely,” he said. “And it’s true what Treasury Secretary Lew previously said, that we can’t solve the entire problem administratively. But what we are doing is examining are there elements to how existing statutes are interpreted by rule or by regulation or tradition or practice that can at least discourage some of the folks who may be trying to take advantage of this loophole.” He noted that many Americans are worried about the trend. “And I think it’s something that would really bother the average American, the idea that somebody renounces their citizenship but continues to entirely benefit from operating in the United States of America just to avoid paying a whole bunch of taxes,” said Obama. “We’re reviewing all of our options. As usual, my preference would always be for us to go ahead and get something done in Congress. And keep in mind it’s still a small number of companies that are resorting to this, because I think most American companies are proud to be American, recognize the benefits of being American, and are responsible actors and willing to pay their fair share of taxes to support all the benefits that they receive from being here. “But we don't want to see this trend grow,” he added. “We don't want companies who have up until now been playing by the rules suddenly looking over their shoulder and saying, you know what, some of our competitors are gaming the system and we need to do it, too. That kind of herd mentality I think is something we want to avoid. So we want to move quickly—as quickly as possible.”