Just for Fun

Whoopee! Tax Busy Season is Longer This Year!

By my rough calculation, the 2016 spring tax busy season for 2015 returns is about 5 percent longer than most years.

Here’s how I got my number.

First, the late, great Bill Morgan used to say that tax season started the day after the Super Bowl.  The “day after” this year was February 8, 2016.

Second, I assume that we tax accountants work a leisurely six days per week during tax season.  On Sundays we go to church, renew acquaintances with our significant others, wash clothes, pay bills, and do all the other things most people measure out over the week.  (Some practitioners (and a certain Mrs. Maultsby) would take issue with my assumption.)

This year is leap year, so we add an extra day.

Because the District of Columbia celebrates Emancipation Day on Friday, April 15 this year, the date for filing or extending many types of returns, including Form 1040, is Monday, April 18.

So, we have a total of three extra workdays.

Is a longer tax busy season a good thing or a bad thing?  Ask me Monday evening, April 18.

VKM

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IRS Releases its Annual “Dirty Dozen Tax Scams” List

The Internal Revenue Service completed yesterday the release of its annual “Dirty Dozen Tax Scams.” Some are perennial chart toppers.  I list the Dirty Dozen in order of the IRS ranking.

  1. Identity theft. I agree. Check out the “Taxes. Security. Together.” on the irs.gov website for tips on protecting your information.
  2. Phone scams. I have personally received several of these calls and so have many of my clients. Ignore these calls. The IRS does not call and threaten people. Also, when the caller refers in the litany of threats to set loose upon you “Her Majesty’s Magistrates,” take that as a strong hint that it’s a scam.
  3. Phishing. These are unsolicited emails seeking financial or personal information. The crooks can claim to be the IRS, a bank, a charity, your kids, or anybody else. They just want to get the camel’s nose under the tent.  Don’t respond. Delete!
  4. Return preparer fraud. The IRS provides some good guidelines on what to look for.   CPAs, attorneys, enrolled agents and – especially – HM&M are good bets.
  5. Hiding money or income offshore. The IRS is pretty good at finding offshore funds one thinks are hidden. The Foreign Account Tax Compliance Act, which went into full effect in 2015, made the IRS even better at tracking down offshore money and other assets.
  6. Inflated refund claims. This item frequently involves taxpayers claiming tax credits to which they are not entitled. See, also, items 8, 9, and 10 below.
  7. Fake charities. This item is more about scamming you than scamming the government. Particularly when large-scale natural disasters strike, there sprout like weeds fake charities with names quite similar to legitimate charities and fake websites that claim to be that of real charities.
  8. Falsely padding deductions. This is a new one to the Dirty Dozen list. It is not a new trick, of course. The IRS must have done some analysis of its audit results to elevate it to the list.
  9. Excessive claims for business credits. This is like item 6 above. An overstated research tax credit is a frequent scamming tool.
  10. Falsifying income to claim tax credits.   This a bit counter-intuitive. It involves overstating earned income in order to qualify for the refundable Earned Income Tax Credit.
  11. Abusive tax shelters. This is always on the list. I think it is the first time that the IRS has mentioned captive insurance companies. Captive insurance companies can be a great and legitimate tax reduction tool, but remember: “Pigs get fat and hogs get slaughtered.”
  12. Frivolous tax arguments. Another perennial. The IRS provides on its website a list of 44 such arguments. It’s hard for me to argue with the IRS about these not-so-brainy arguments. They range from “only foreign-source income is taxable” to “the Internal Revenue Service is not an agency of the United States.” Huh?

VKM

 

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It’s Almost Valentine’s Day – I Have An Excuse!!

The Internal Revenue Code has about 3.7 million words.

How many times is “love” mentioned in the Code? Zero.

How often does “romance” appear in the Code? Not at all.

Is “affection” ever used in the Code? No.

Where is the term “sweetheart” found in the Code? Nowhere.

So, the next time Ms. Maultsby questions my ardor, I’ll tell her that such terms are just not part of my vocabulary.

VKM

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Mo Vaughn Strikes Out

Remember Mo Vaughn? Big man and big hitter.  American League MVP in 1995 with the Red Sox.  Mo had his best year in 1996, when he hit for a .326 average, played in 161 games, with 44 home runs and 143 RBIs.  His recent case before the Sixth Circuit Court of Appeals is a cautionary tale:  you can’t delegate your responsibilities to report and pay your taxes.

After he retired from baseball, in 2004 Maurice Samuel Vaughn engaged a financial manager and a CPA to take care of all of his financial affairs. Seems to me like the prudent thing to do.  This arrangement continued until late 2008.  Mo would deposit all his income into two accounts – one personal and one business.  The financial manager was the sole signatory on both accounts.

In 2004, 2005 and 2006, the financial manager properly filed all of Mo’s income tax returns. In 2007, the financial manager neither filed Mo’s returns nor paid his taxes.

In 2008, Mo decided to manage his financial affairs on his own and terminated his relationship with the financial manager and the CPA. To Mo’s utter surprise, he discovered that the financial manager had been stealing his money for years.

Mo sued the financial manager and won judgements of $4 million against her and her company upon which he has not collected.

Mo didn’t have enough cash to pay his 2007 taxes.  It took him a while to get square with the Feds.  He asked that his penalties be abated for reasonable cause:  he had hired experienced financial professionals to take care of his financial affairs.

The Sixth Circuit rejected his appeal. The court said it was a simple case.  Acting on advice of a tax expert may show exercise of due diligence and constitute a reasonable cause for such actions.  However, it does not take a tax expert to know that one has to file a return and pay his taxes.  Those responsibilities are non-delegable statutory obligations of the individual.  The court said the lack of oversight of his agents foiled Mo’s reasonable cause argument.

So, that’s the sad tale with an important lesson. In case you are wondering, Mo’s financially just fine today. He is a very successful real estate investor and owns a trucking company.  According to Forbes, he now writes his own checks.

VKM

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