Looking for Scofflaws? Look no further than the Federal Government!

The Treasury Inspector General for Tax Administration (“TIGTA”) released to the public yesterday a report:  “A Concerted Effort Should Be Taken to Improve Federal Government Agency Compliance.”  As of December 31, 2011, 70 Federal agencies with 126 delinquent tax accounts owed approximately $14 million in unpaid employment taxes.  In addition, 18 Federal agencies had not filed or were delinquent in filing 39 employment tax returns.  In the version of the report released to the public, all of the names of the Federal agencies were redacted.

If a business fails to pay employment taxes, the IRS can assess penalties and interest, file tax liens, fine the responsible officer for nonpayment of the trust fund portion of employment taxes, and seize property.  You can be sure that the IRS will exercise any or all of these powers to get the employment taxes. 

On the other hand, Federal agencies are forbidden from paying interest and penalties to the IRS.  Thus, the IRS will not assess those penalties or take enforcement actions against Federal agencies with delinquent tax accounts.  Professional courtesy, I guess, or maybe it’s because taking money from one agency and giving to another agency as a fine is a zero sum game.

The report points out that Federal agencies often have good excuses for not paying their employment taxes.  Don’t we all?  



Blow the Whistle, Go to Jail, Collect $104 Million

Last month, I gave a speech at the Ft. Worth CPA Tax Institute about Foreign Financial Asset Reporting.  (If you have insomnia, you can find a copy of the speech on the Thought Leadership page of the HM&M website.)  A big part of my speech dealt with the Foreign Account Tax Compliance Act of 2010.  This new law was a direct result of the Swiss bank UBS AG being caught assisting thousands of U.S. taxpayers in hiding money from the U.S. government.

How was the bank caught?  Bradley Birkenfeld, a former UBS banker, turned in his employer.  He told the IRS how slick UBS Swiss bankers came to the U.S. to court rich and unscrupulous Americans, amassed $20 billion from those folks to hide in Switzerland, and then helped them cheat Uncle Sam.  A stand-up guy, right?

Well, not exactly.  He pleaded guilty to conspiracy to defraud the government and spent two years in jail.  It seems that his “honorable act” was motivated by a whistleblower program administered by the IRS that became law in 2006.  He argued (from behind bars, I guess) that he deserved billions of dollars under that program, but eventually got $104 million.  Actually, after taxes and attorney fees, it works out to a bit less than $50 million – a little less than $50,000 per day in jail.  This guy made out like a bandit.  Oh, wait a minute, he is a bandit.

I am all for catching tax cheats; I am paying more because they are paying less (or nothing).  I just don’t like the idea of paying somebody who went to jail for being part of the dishonest scheme.  Seems to me like the authorities could have offered to throw him in jail, instead of throwing him under it, and still got him to sing like a bird.


Personal Taxes


My first blog in a while.  I’ve been really busy with looming tax deadlines; stocking canned foods in my basement for “Tax Armageddon,” aka the “Fiscal Cliff;” and readying for a graduate oil and gas tax class that I am teaching this fall at the University of North Texas.  Also, I bought a summer home in Michigan since I last blogged.  Oh yes, I am also preparing for a piano recital in New York in November.

In my spare time, I prepared a white paper about tax planning for the rest of the year (and beyond).  It is on the HM&M website on our Thought Leadership page at www.hmpc.com.  The “Bush Tax Cuts” enacted in 2001 and 2003 are set to expire at the end of 2012.  Whether they will be extended totally, in part, or not at all is unknown and may not be known until sometime in 2013.  The planning ideas in the paper are premised on a current tax-favorable environment and the expectation of a less tax-friendly environment in the future.  To access the white paper, click on this link:



The tax media are atwitter this morning about a case in the New York State Court of Appeals.  Nite Moves, euphemistically referred to as an “entertainment venue featuring female dancers,” is challenging New York State’s findings that the venue should have collected sales tax on admissions, but did not.  Nite Moves’ primary argument is that it qualifies for an exemption available to a place of amusement featuring dramatic or musical arts performances.  Dr. Judith Hanna, a cultural anthropologist, was an expert witness for Nite Moves. Her report found “that the presentations at Nite Moves [are] unequivocally choreographic performances.”  The attorneys for Larry Flynt’s Hustler Club are asking for permission to present friend-of-the-court briefs.

I could not make this stuff up, even if I tried.  You have to admit that most people would find the Nite Moves case a little less boring than dissecting the depletion limitation rules under Section 613A of the Internal Revenue Code.