Taxable Talk

Rob Reiner resigned as head of the First-5 Commission on Wednesday, as more pressure mounts to do a thorough investigation. Indeed, as the Chronicle story notes, both Democrats and Republicans believe something's fishy with how the Commission spent money raised through the cigarette tax.

Meanwhile, Los Angeles County Sheriff Lee Baca and other law enforcement officers came out in support of Proposition 82, the help Las Vegas, Phoenix, and Denver Initiative (aka the tax the wealthy for mandatory pre-school initiative). Support for Proposition 82 has fallen to 52 percent, which is about 30 percent higher than it should be if voters realized the economic consequences. There's still no word if the Nevada Development Authority will sponsor advertisements supporting Proposition 82.

I live and work in beautiful Orange County, California. Several years ago the voters of this county passed a 0.5% sales tax increase to fund transportation issues (such as the widening of Interstate 5 through Orange County). That sales tax increase expires at the end of 2011. The Orange County Transportation Authority (OCTA) administers the tax, and has been running a somewhat blatant advertising campaign in support of renewing Measure M. Just one little problem: that's probably illegal.

No matter what your view is on Measure M, it's irrelevant; it's illegal (under California law) for a government agency to publicly campaign for a proposition. And as the Orange County Register noted in an editorial, the OCTA issued an 8-page campaign mailer an 8-page informational brochure praising the benefits of Measure M. Sort of sounds like the campaign for pre-schools that Rob Reiner ran. You can see the ad/brochure here.

While Rob Reiner has suffered the consequences of his actions, it's uncertain whether the OCTA will. Hopefully, the Legislature and the Orange County Board of Supervisors will tell the OCTA to spend their money on improving the freeways and not on glitzy campaign literature informational brochures.

CTEC, the California Tax Education Council, released a press release reminding taxpayers of the automatic extension available (Form 4868). The press release noted that the extension, which is an extension of time to file, not pay, is for four months.

Well, that used to be correct.

This year the automatic extension is for six months, a rare case where the IRS is matching how California has handled extensions.

Somehow it seems appropriate that the agency that regulates some California tax preparers (CTEC regulates all preparers in California except EAs, CPAs, and attorneys) isn't aware of the rules.

Let's say you went to the casino last April, and were lucky, and won $1,000. Last August, you went to the casino, and you weren't so lucky, and you lost $1,000. What are the tax implications?

For federal taxes (IRS), you have $1,000 of other income (line 21 of Form 1040) and a $1,000 itemizable deduction on Schedule A (not subject to the 2% AGI limitation on itemized deductions). For federal tax purposes, this will likely have few implications for many Americans.

However, let's suppose you live in Illinois. Illinois' state income tax is more of a gross receipts tax—there is no deduction allowed for gambling losses. For the amateur gambler, you have $1,000 of gambling income in Illinois.

There are nine states that treat gambling in this manner. Here is a list of the nine states that gamblers should avoid residing in:

Connecticut
Illinois
Indiana
Massachusetts
Michigan (first $300 exempt)
Minnesota*
Mississippi
Ohio
West Virginia

Interestingly enough, Connecticut, Illinois, Indiana, and Mississippi all have casino gambling.

Minnesota is unique (as far as I can tell). Minnesota's standard income tax allows deductions for gambling losses. However, its' AMT does not, causing anyone with significant gambling losses to fall into Minnesota AMT. If anyone knows of any other states that don't allow gambling losses to be deducted on the state AMT, I'd love to know.

I'll point out that there are several states that don't have any state income tax (or just tax interest and dividends): Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. That's one less form (or set of forms) to complete each year.

If you're a plastic surgeon, and you use breast implants as part of your work, do you have to pay sales tax on the implants you use?

Yes, in Alabama.

The Alabama Department of Revenue recently took a doctor to task for not paying use tax on the breast implants he was using in his surgery practice. (Use tax is when the user is required to pay the equivalent of sales tax when the seller doesn't charge sales tax. Almost all states have use tax laws. For example, that book you bought on Amazon tax free—well, you're probably supposed to pay use tax on it. Indeed, many states have added a "use tax" line on their income tax forms.)

Alabama considers "...doctors, as members of a learned profession, are not making retail sales when they provide or supply tangible property to their patients incidental to their professional services. Hamm v. Proctor, 198 So.2d 782 (Ala. 1967); Haden v. McCarty, 152 So.2d 141 (Ala. 1963). However, the use or consumption of the property by the doctors in providing the services in Alabama is clearly subject to Alabama use tax." So those stitches, bandages, and, yes, those silicone implants are taxable.

California appears to be headed in the opposite direction. The Board of Equalization ruled on February 1st that cosmetic medical treatments, including Botox and silicone implants, should be exempt from sales tax.

But one state taxes cosmetic surgery—New Jersey. Specifically exempted from the New Jersey ordinance are reconstructive procedures. However, cosmetic dentistry is taxable. Teeth whitening is specifically cited as taxable. Would orthodontia be taxable? I can imagine a sales tax auditor peering into some childs' mouth, seeing how bad the overbite is. "Your son only has a 40% overbite, so you must pay sales tax." But I digress....

Of course, when I read the Alabama story, I remembered the wonderful Chesty Morgan. Humorously, Chesty tried to deduct the implant surgery as a medical deduction (subject to a 7.5% AGI limitation) and lost in Tax Court. But the judge allowed her to deduct the surgery as an unreimbursed business expense (subject to a 2.0% AGI limitation).

So, the moral of this tale is that if you're a plastic surgeon in Alabama, you'd better charge sales tax on those silicone implants or you could be busted.

Thanks to the NAEA for alerting me to this story.
Link: Alabama Administrative Law Judge Ruling

I previously wrote about Las Vegas' attempt to draw more businesses from California. A few days ago I saw one of the ads: A giant peanut crushed a Californian, akin to California's huge tax burden crushing a business. One Los Angeles television station, KABC, has refused to run the ads, citing an anti-California theme and offensiveness.

KABC is correct. The ads are anti-California, but they're hardly offensive. Accurate is a better statement, especially when you compare the extremely offensive (high) tax burden in California to the non-offensive (low) tax burden in Nevada.

I haven't seen another ad that the Nevada Development Authority has run. It features a poker game between California business and Las Vegas business. According to the Las Vegas Review-Journal, the Las Vegas business gets three aces and a "No state personal income/corporate tax card" while California gets an anti-business card. Las Vegas moves all-in while California folds.

The Nevada Development Authority has $5.5 million in marketing dollars to spend. But their most important bit of marketing is out of their hands—the results in the California June primary on Proposition 82, which would increase California's already offensive tax burden.

Have you ever thought of an area where you'd like to see the IRS issue guidance? Now is your chance to send the IRS cogent tax items that need clarification.

Today the IRS issued Notice 2006-36 requesting recommendations for the 2006-2007 Guidance Priority List. While any taxpayer can submit anything, in order for your recommendation to be seriously considered, you should ask yourself whether the recommendation:

"1. Whether the recommended guidance resolves significant issues relevant to many taxpayers;
2. Whether the recommended guidance promotes sound tax administration;
3. Whether the recommended guidance can be drafted in a manner that will enable taxpayers to easily understand and apply the guidance;
4. Whether the Service can administer the recommended guidance on a uniform basis; and
5. Whether the recommended guidance reduces controversy and lessens the burden on taxpayers or the Service."

If you have any ideas that do, submit them to the IRS by May 15th, to:

Internal Revenue Service
Attn: CC:PA:LPD:PR (Notice 2006-36)
Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, D.C. 20044

Here's the 2005-06 Guidance Priority List. Not everything on the list receives guidance, of course.

Assume that you're a conniving individual. The pesky IRS sends you a notice of non-payment. You decide to either (a) ignore it, or (b) move, but not give the IRS your new address. What will happen? Today, the Tax Court weighed in.

When the IRS sends you a notice, they send it to your last known address. If you move, the IRS has a form for you to file, Form 8822, that you can use to notify them of your new address. (Most state tax agencies have similar forms; California has Form 3533.) It's your responsibility to notify the IRS. If you filed your tax return with a new mailing address, that also is sufficient notification. By the way, like anything else you send to the IRS (or FTB), you should send your change of address by certified mail, return receipt requested so that you have proof that you mailed the notice.

In the case at issue today the petitioners did none of those things. They claimed that they didn't receive the IRS's notices. In their case, they hand't moved, and it may be that the PO Box they used had horrible service. Or it may be that they did receive the notices, and ignored them. Unfortunately for the petitioners, the Tax Court chose not to accept their testimony of non-receipt, and they lost their case.

Case: Prakasam v. Commissioner, T.C. Memo 2006-53

Ray Wersching had an illustrious career in the NFL. After starting his career with the San Diego Chargers, he moved on to the San Francisco 49ers, and played in Super Bowls XVI and XIX. Wersching holds the career Super Bowl record for most field goals (5). After retiring from the NFL, Wersching started an insurance company, Ray Wersching Insurance Agency, in Redwood City, CA, south of San Francisco on the Peninsula.

On Wednesday, Wersching was indicted for allegedly misappropriating premiums that should have been paid to Farmers Insurance Group, and of evading taxes on $3.6 million of corporate income in 1999 and 2000. Last year, the company's co-owner, Mary Ann Locke, was indicted on similar charges.

Wersching's attorney told the San Francisco Chronicle, "The money that was stolen went to Mary Ann Locke. Ray got none of it...She spent $8 million on a lavish lifestyle and gambling in Nevada."

Wersching, who is also a CPA, is due in court on Monday.

News Stories: San Francisco Chronicle, San Jose Mercury

Don't try this at home.

Suppose you set up some offshore companies. You take invstors' money and buy gold coins (making the money harder to trace). Add a few shell companies, here and abroad, ignore those pesky IRS (and Treasury) regulations requiring you to disclose foreign bank accounts, mix it up, and you end up with a wonderful scheme to hide assets from the IRS.

Almost. The IRS found out. The perpetrators are finding their way to federal institutions. The Portland Oregonian reported today that the scam cost the IRS over $22 million in unpaid taxes. Terry Neal, of Gresham, OR, will have five years to consider his crimes (in prison) and was also fined $50,000. His co-conspirators received lesser sentences (but did get jail time). And the IRS ended up seizing most of the gold, and did collect over $176,000 from selling it.

The moral is the usual one: If it sounds too good to be true...

News Story: Portland Oregonian

Courtesy of Roth Tax Updates, and CCH, here's how to request a refund:

Taxpayers should fax their protective claims to the FTB at 916-845-9796. In the fax, taxpayers should note that this is a protective claim and assert that the LLC fee is an unconstitutional tax. The following information should also be included: (1) the LLC's name and identification number; (2) the tax years involved; (3) the amount of the claim; and (4) the name of a contact person and his or her phone number and fax number. The FTB will send an immediate fax confirmation.

The FTB is going to appeal, so don't expect any money any time soon.

Remember Captain Renault from Casablanca? He steps into the back room of Rick's Cafe, and says, "I'm shocked, shocked to find that gambling is going on in here!" A croupier then hands him a pile of money and says, "Your winnings, sir." That's how I feel when discussing corruption in New Jersey.

Last week I reported on corruption at the Department of Taxation. Today, courtesy of the TaxProf Blog, we find corruption in the school system. The report shows that administrators are making far more money than what one would expect. The TaxProf Blog then goes on to note that schools in New Jersey are funded by property taxes, and that New Jersey's property tax rates are among the highest in the nation. The Wall Street Journal has a particularly good critique of this issue in an editorial today.

So what do you suppose New Jersey's Governor Jon Corzine would do? Promise to stamp out the problem? A fight against corruption? How about a budget full of tax increases? No, he couldn't have that kind of poor political timing.

Sorry, the cynics win.

"Residents see higher taxes, less relief under Corzine's $30.9 billion budget" screams AP's headline in Newsday. The article goes on to detail a $1 billion increase in sales tax (by increasing the tax rate from 6% to 7%), and another $0.8 billion increase in other taxes. To his credit, Corzine also wants to find a few programs to cut ($2 billion in spending on a $31 billion budget). However, while he may be cutting some programs, the budget is, overall, a 9% increase from fiscal 2006's $28.3 billion.

Florida has some unusual gambling laws. A court last year ruled that no-limit Texas Hold'em tournaments violated the law. On Friday, an appeals court ruled that the Florida Department of Pari-Mutuel Gaming erred in its decision that no-limit Texas Hold'em was illegal.

Interestingly enough, the original ruling hurt tax revenues. The appellate decision could be appealed, though, to the Florida State Supreme Court.

News Story: Sun-Sentinel

Proposition 82, Rob Reiner's Preschool/Tax Increase Initiative, is really the "Help Las Vegas, Phoenix, and Denver" Initiative. Las Vegas decided that I am absolutely correct. Today, Las Vegas' mayor, Oscar Goodman, announced a new initiative to bring more California businesses to Las Vegas. "There is very little we can give them that they don't get already. We just give them ourselves."

Goodman noted to Reuters that Las Vegas isn't offering business incentives. Well, they don't need to. Even with increased real estate costs in Las Vegas, it's still less expensive than California. Add in workers compensation, high income taxes, and the potential disaster of Proposition 82, and you have a trifecta. Las Vegas even has a beach (well, I saw one at the Mandalay Bay hotel's pool....)

News Story: Reuters

Renato Medina is the principal owner of Lucky Chances, a Bay Area poker club located in Colma. According to the US Department of Justice and the IRS, he allegedly caused Lucky Chance's to deduct $2.6 million in bogus business expenses, causing the government to lose out on nearly $1 million in tax revenues. Medina was indicted on conspiracy and tax evasion charges. Also indicted were his neice and nephew. All have been released on bond pending the trial.

Medina faces three counts of tax evasion, five counts of making false tax returns, and one count of conspiracy. If convicted on all counts, he could face 35 years in prison and fines of well more than $1 million.

Medina is the principal owner of Lucky Group, the holding company that owns Lucky Chances. The Lucky Group's website states, "The Lucky Group of Companies is committed to maintaining the highest ethical standards and demonstrating the highest personal standards of integrity at all levels, as well as a commitment to truth and fair dealing and complying with the spirit and letter of all laws and regulations wherever they conduct its businesses." Mr. Medina's attorney, Cris Arguedas, told the San Francisco Chronicle, "This is a simple tax case...[and Mr. Medina] asserts his innocence."

In a related story, two State Senate candidates are returning donations from Medina.

News Story: San Francisco Chronicle

Out of the news and into my email inbox this afternoon comes word that a Bell Buckle, TN woman and a Florida couple have been charged with preparing tax returns with phony deductions, causing unwarrented refunds to taxpayers in the millions of dollars, and thousands of dollars in fees to the alleged perpetrators. If convicted on various counts, the three could be facing five years inprisonment and fines of up to $250,000.

The IRS happen to send out list of frivolous arguments yesterday. The TaxProf Blog has a nice list of them here. Joe Kristan of Roth Tax Updates presents an interesting list of real and phony frivolous arguments here. A more complete list of frivolous arguments can be found here.

Of course, when you have to debate whether a frivolous argument is real or phony (a phony frivolous argument?!?)....

News Story: Shelbyville Times-Gazette

...But they were phony arguments.

Roy Stallard went before the Tax Court before. In Stallard v. Commissioner (T.C. Memo 1992-593), he was fined $8,000 for making frivolous arguments. Fast forward a few years. Mr. Stallard again finds himself in Tax Court. The IRS found that he owed $52,174; he challenged it by filing a petition in Tax Court. But that petition cited numerous Tax Protester arguments, such as:

"4. Because, with respect to a tax imposed on the transfer of property, the person made liable for its payment may be the transferor, transferee or as in the case of the death tax, a third party, due process requires that Congress identify the person made liable for payment of each tax imposed, and so it usually does. The legal personality of each person made liable for the payment every other tax imposed by Congress is described clearly within the IRC, but such is not the case with regard to the purported tax debt here. There is neither an Act of Congress nor a Treasury Regulation which clearly and unequivocally identifies the person made liable for the payment of the purported tax debt."
[Reproduced literally.]

Needless to say, the Tax Court wasn't impressed and gave Mr. Stallard a warning:

"...[The] Court also indicated that the petition contains statements, contentions, and arguments that the Court finds to be frivolous and groundless...In the event that petitioner continues to advance frivolous and/or groundless statements, contentions, and arguments, the Court will be inclined to impose a penalty not in excess of $25,000 on petitioner under section 6673(a)(1), I.R.C."

Surprise of surprises, Mr. Stallard responded with an amended petition that contained a series of frivolous arguments. It starts, "The notice of deficiency is notice in name only and does not meet due process of law requirements for notice...." It makes for interesting reading.

As we've said many times, Yes Virginia, there is an income tax and you must pay it. The Tax Court wasn't as amused as we are in reading his arguments. The Tax Court judges just don't have much of a sense of humor about court arguments. They warned Mr. Stallard that he could be fined $25,000. He was.

Case: Stallard v. Commissioner (T.C. Memo 2006-42)

Proposition 82, the pre-school/tax increase/help Las Vegas, Phoenix and Denver Initiative, continues to have support at the polls here in the Golden State. Rob Reiner, who wrote the initiative, continues to find himself in a hole.

Yesterday Reiner held a news conference in Sacramento. Reiner is chair of the "First 5" Commission, funded by a tobacco tax. The First 5 Commission spent $23 Million on a series of commercials that ran in December and January promoting pre-school. I doubt it's a coincidence that Reiner happens to have written an initiative that will be voted on in June that creates a bureaucracy for pre-school.

Meanwhile, every Republican State Senator has called on the Governator to replace Reiner on the First 5 Commission. Both Republicans and Democrats have forced the State Auditor to audit the First 5 Commission. The initiative is now facing opposition from not only groups such as the Howard Jarvis Taxpayers Association, but Democrats. Republican political commentators such as Hugh Hewitt have been taking the Governator, Reiner and the initiative to task.

Still, the $23 Million has had an impact. With no major Republican issues on the June ballot (as of now), and a Democratic primary for Governor, it will be very interesting to see if Proposition 82 passes. If the election were held today, it would (according to polling data). That shows you the sad state of California's electorate.

A couple of weeks ago, I noted that phishers have started targeting people by claiming that you can receive a small tax refund. Just click on their link (to a phony IRS website), give out your information, and we'll get you $82.58 or some other small sum. In Tuesday's Wall Street Journal (paid subscription required), there's yet another article about this scam.

The IRS does not send out emails to taxpayers. The IRS website does have a tool to find where your refund is (you need your social security number, filing status, and the exact amount of your refund).

Remember, if it sounds too good to be true, it probably is.

That was the decision Iowa was faced with after the Iowa Supreme Court ruled that tax rates at race track (horse racing) casinos were unconstitutional in 2004. Today, Iowa is in the midst of a casino building boom, with four new casinos opening and many existing casinos undergoing renovations.

Of course, legislators when faced with a tax shortfall (or a tax being declared illegal/unconstitutional) try for some other means of raising the same revenues. Perhaps we can call it a "user fee." Maybe some video lottery terminals will raise some money. Or let's just add some casinos. I mean, can we actually consider cutting spending? Of course not.

The beneficiaries of this policy are obvious: the casinos, Indian tribes operating some casinos, the State of Iowa (those tax revenues are still flowing), and in one sense, the gamblers in Iowa. After all, with the renovations and new facilities, it's easier to gamble and it's more comfortable (or soon will be).

Of course, it's hard to win in most gambling, as the odds are with the house. You could try playing poker (several casinos in Iowa offer real poker). I'd advise reading a book first (shameless self promotion: I'm the co-author of a book on no-limit hold'em), as most poker players are losers.

So what's the moral of the story? In most jurisdictions, government will find a way to make sure those tax revenues keep coming in.


News Story: Des Moines Register

Iowa Supreme Court Decision
Roth Tax Updates Story on Iowa Supreme Court Decision

William Campbell, the former mayor of Atlanta, was convicted yesterday of three counts of tax evasion but acquitted on the more serious RICO (Racketeer Influenced and Corrupt Organizations Act) charges.

The trial ended a seven-year investigation of corruption in Atlanta city government. Ten people were convicted through the investigation. Campbell's attorney noted, "We knew there were some technical violations of the tax code. They're serious, but we're going to be O.K." Campbell faces up to nine years in jail and $300,000 in fines but will likely face jail time of 2-3 years.

News Story: New York Times

Well, not really.

From the Newark Star-Ledger comes word that the New Jersey Director of Taxation, Robert Thompson, Deputy Director Harold Fox (no relation), and Assistant Director for Compliance David Gavin have been suspended. The New Jersey Commission of Investigation alleges that the three received gifts from OSI Collection Services. Governor Jon Corzine ordered the expedited ethics investigation. The three were suspended with pay.

The Commission report alleges that the three were wined, dined, taken to spas, Broadway shows, and on golf trips. The report also alleges that the three allowed OSI to overbill New Jersey by $1 million. OSI collected delinquent taxes for the state on an outsourcing contract. The contract expired at the end of February and was not renewed.

News Story: Newark Star-Ledger

And it's a big but.

Thanks to the TaxProfBlog and Roth Tax Updates for giving me the tip on a case decided in San Francisco, Northwest Energetic Services v. Franchise Tax Board. Northwest, a Washington State LLC, sued to recover its LLC Gross Receipts Tax, er, Levy, from the Franchise Tax Board. Northwest had no operations in California, but was registered in the state. The court ruled that the levy is really a tax and that because the tax, er, levy was based on unapportioned income, it violated the due process and interstate commerce clauses of the Constitution.

As Joe Kristan (Roth Tax Updates) notes, the FTB will appeal.

In any case, as I read the decision, the levy (tax) is legal for a California based business with all of its income derived from California. Indeed, if the gross receipts levy is modified so that it is based on an apportionment (similar to Schedule R used on California corporate tax returns), then it would be legal.

If you are a member of an LLC, make sure that your LLC applies for a refund. California has a four-year statute of limitations on refunds (given timely filing); your refund request for tax years 2001 needs to be postmarked by April 15th (certified mail, return receipt requested, of course).

Given that California is still in dire financial straits, don't expect anything to change. Remember that the California LLC code prohibits professionals from being a member of an LLC in the state. Also remember that this decision will be appealed, and, as Joe Kristan notes, you should continue to pay your LLC levy, er, tax for the foreseeable future.

Hat Tips: TaxProf Blog, Roth Tax Updates

In Maryland, a certified accountant was arrested on tax fraud charges. Allegedly, he inflated deductions, and inflated his tax preparation charges. He apparently used some of the $300,000 his scheme raised to buy property.

Story: Baltimore Sun

For those of you (like me) who voted last December in the election to replace Chris Cox as Congressman, it's just about time to vote on his replacement. John Campbell was the State Senator for the 35th District (Irvine and surrounding cities). On April 11th, we will vote in a special election for his replacement.

The Orange County Registrar's home page on the election is here. The district is overwhelmingly Republican; there are two Republican candidates in the primary: Diane Harkey and Tom Harman. If no candidate receives 50% of the vote plus one, there will be a run-off election held in conjunction with the State Primary Election on June 6th.

According to the San Francisco Chronicle, State Senator Don Perata (D-Oakland) has dropped his support of Rob Reiner's Proposition 82, the mandatory preschool/increase income tax/Help Arizona, Nevada, and Colorado Initiative, because it was too expensive. Perata noted that the estimated cost per child (under Proposition 82) would be over $8,000 (for a half-day); this is larger than the per-student cost for a full day of school at some elementary schools in California.

Perata was also troubled by the year-end advertising campaign that First Five mounted, noting "That was over the line. A blatant effort to promote the initiative." There have been calls in the state legislature for audits of First Five.

News Story: San Francisco Chronicle

When I send out a tax return to a client, and it has to be mailed to a tax agency, I always state, in my letter, "mail, using certified mail, return receipt requested...." Joe Kristan of Roth Tax Updates today reported on a court case that made its way to the Iowa Supreme Court. A taxpayer's refund was denied because he couldn't prove it had been mailed in on a timely basis. Apparently, the accountant mailed the return for the taxpayer...but using just first class mail.

Joe Kristan's advice at the end of his post is the same advice we've been giving out for years:

"The Moral? Go to the post office, use certified mail, return receipt requested, and save the postmark receipt and return receipt in a safe place. Better yet, use electronic filing and save the whole runaround." If you're going to spend money having a professional prepare your return (and it's a lot more than $4.50), spend the $4.50 to mail your return!

Hat Tip: Roth Tax Updates

In a recent unpublished opinion, the Eighth Circuit looked at a hobby loss case, Montagne v. Commissioner. One of the points we continually make is to document, document, document. The Montagnes had a horse-breeding "business," but the Tax Court ruled that it was a hobby. The Eighth Circuit noted that there was no financial projections or business plan, and that they co-mingled their business and personal expenses (one bank account). So if you're going to have a business, treat it that way: maintain separate records and a separate bank account.

Case: Montagne v. Commissioner, 04-4137

The Franchise Tax Board is in its second year of the "Ready Return Program." Under this program, the FTB prepares returns for individuals who have very simple returns -- just wage income, single, no dependents. But the program has been quite controversial.

Professor Maule today gives an excellent review of the program. If you're at all interested in the controversy, read it all.