Archive for the ‘Iowa’ Category

A Structured Result

Monday, June 4th, 2012

A building needs a sound structure to survive. In the world of tax, structuring is something to be avoided. A used car dealer in Waterloo, Iowa has learned that.

The IRS learned of alleged structuring of deposits for Century Finance, a lending arm of Champion Motors in Waterloo. The IRS raided the business. I’m unsure if they found any structuring, but they did find an alleged theft of $71,000 from the business by Brian Beckman. Mr. Beckman wasn’t prosecuted for the theft, but for the tax loss from the theft. Now that loss is only $6,400 but it has also led to Mr. Beckman pleading guilty to filing a false tax return.

For those who aren’t aware, structuring in tax is making cash deposits smaller to avoid currency reporting requirements. If you make a cash deposit of $10,000 or more, a currency transaction report is required. So some unscrupulous individuals break that up into two $5500 deposits. That’s a felony (if done deliberately): structuring.

As for Mr. Beckman, it’s likely he’ll receive probation and restitution.

I Spilled my Coffee Thanks to Joe Kristan

Tuesday, July 26th, 2011

This morning, Joe Kristan posted about an Iowa couple who had a unique method of preparing tax returns. I made the mistake of reading the actual court decision while drinking my morning coffee:

According to [the defendants], if you believe that looking successful helps make you successful, your clothes, hair care, and manicures are deductible. If your dog barks while you are away from your home based business, it’s deductible. If your child’s nanny ever answered the business phone, the nanny is deductible. If you visit a business associate while on vacation, it is deductible. If you pay rent to yourself, or even if you don’t, it’s deductible. If you have a six year old child, payments to the child are deductible employee expenses. If you have used your living room television in a business meeting, it’s deductible. And your hobbies, like scuba diving, pet cats and flying, easily deductible.

The trouble was that I was laughing so much that the coffee hit the carpet. As you hopefully know, none of the items noted by the Court are deductible; the defendants in this case absolutely deserve their permanent injunction.

On a more serious note, Joe noted,

The case is noteworthy in another respect: it shows how useless competency exams and CPE requirements are in stopping rogue preparers. One of the preparers — the one who signed all of the disputed returns — was an Enrolled Agent. That meant he had to pass a competency test that is certainly more difficult than any that will be imposed by the new IRS preparer regulation regime. He also had to take continuing education to maintain that status. [emphasis in original]

I disagree somewhat with Joe regarding competency exams, but agree with him regarding CPE.

Competency exams will weed out the lowest of the low hanging fruit. There are undoubtedly some preparers who are so incompetent that they have no chance of passing any exam. In that respect, the RTRP exams will have an impact.

However, CPE is what you make out of it. For most tax professionals, CPE gives us a chance to learn new material in tax. True tax professionals attend courses and want to learn.

That said, it’s relatively easy for an incompetent preparer to obtain CPE. Just go to courses, doodle on the materials presented, and go home still believing that petting your dog is deductible. As long as you attend the full course (typically, your badge is scanned upon entering and leaving) you will get CPE. Attend enough CPE and your license can be renewed.

Joe would prefer that the money being spent on building a new bureaucracy be used to spot rogue preparers. Originally, I was indifferent about the new PTIN and registration requirements. (For the record, the National Association of Enrolled Agents, of which I am a member, strongly supports both.) I am now moving more towards Joe’s opinion (that this is more or less a power grab by the IRS with no real benefits to taxpayers or tax professionals).

Hawaii Likely to Increase Film Credits; What Could Go Wrong?

Monday, May 2nd, 2011

Do you like Hawaii Five-0? No matter, it’s very likely you will see far more films and television productions made in Hawaii in the near future. The legislature in Hawaii is considering increasing the film credit rate from 15% to 35% in Oahu and 20% to 40% on all other islands. One film company has a goal of ten movies and two television shows a year! It sounds great, as it would lead to thousands of jobs. What could go wrong?

Plenty. Joe Kristan has been covering the Iowa film credit scandal; see, for example, this update from last week. Let’s just say when there’s a lot of money involved, there’s the urge by some to stick their hands in the cookie jar. Perhaps this won’t happen in Hawaii, but instead of making Hawaii a better place for filmmakers, why not lower the tax rates for everyone so that Hawaii encourages all industries to locate their. A far simpler solution than targeted tax breaks, but its also one that usually can’t lead to corruption.

Not All Publicity Is Good Publicity

Tuesday, March 23rd, 2010

There’s an old saying, “All publicity is good publicity.” Sometimes, though, it’s not. Especially if you’re a Bozo.

Take Scott Mitchell, the owner of Central Iowa Amusements. Mr. Mitchell’s company got some good words in the Des Moines Register; his company had $464,676 of revenues from touch screen lottery terminals in Iowa. Unfortunately, Mr. Mitchell neglected to tell his accountant about that income. Even more unfortunately for Mr. Mitchell, the IRS does read the newspaper. Mr. Mitchell is likely heading to ClubFed after being found guilty of tax evasion.

Joe Kristan has more.

Why Is Iowa Looking at Allowing Major Poker Tournaments?

Sunday, January 24th, 2010

Iowa House Majority Leader Kevin McCarthy (D-Des Moines) is proposing legislation to allow large poker tournaments in ballrooms at the state’s 17 licensed casinos. Given my vocation and avocation I’m always happy to see an expansion of poker in the United States. But the cynic in me did have to wonder if this was done for helping poker or for some other reason.

The cynic in me was correct. Mr. McCarthy is looking at ways of increasing tax revenues to help Iowa’s budget situation. Mr. McCarthy said, “We’re looking at ways that would be win-win for the institutions, the communities and the state.” I’ll translate that: We’re looking at a way of increasing tax revenues. Since I can’t add video poker terminals (that was voted down by the Iowa legislature) this looks like a way I can increase revenues so I can spend more money.

Perhaps I am just a little too cynical about Mr. McCarthy’s motives. However, this appears to be yet another case where the cynics are right.

Iowa Flooding

Sunday, June 15th, 2008

The floods in Iowa have hit the tax blogging community. Joe Kristan, the blogger at Roth Tax Updates, and all of downtown Des Moines were evacuated Friday afternoon because of the floods.

The American Red Cross
is one good place to make a donation for flood relief.

The Pumpkin Tax Is No More

Thursday, November 1st, 2007

Food and food ingredients are defined as substances that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value.

So reads the Iowa Department of Revenue’s policy on what is food. Why is this important? Because the Iowa Department of Revenue decided (apparently in 2006) that pumpkins are mainly sold for decoration, and that sales tax should apply on those pumpkins sold for decoration but not on those sold for food.

I can just imagine a conversation at a supermarket in Des Moines. “Mrs. Smith, are you buying that pumpkin to eat or for decorating your front porch on Halloween?”

And what would the Iowa Department of Revenue think about someone who bought a pumpkin for both decorating and for food? Tax only half the pumpkin?

Yesterday, stories about the tax began circulating on the Internet and mass media (Google News showed 287 stories on the topic).

Luckily, some sanity has hit Iowa. Governor Chet Culver announced, “It has come to my attention that a policy change made in December of 2006 – before I took office – is resulting in this ridiculous pumpkin tax. I have directed the Department of Revenue to do the common-sense thing and suspend collection of this tax and offer refunds to consumers or retailers who have been affected.”

Increase Casino Tax Rates Or Increase Casinos?

Monday, March 13th, 2006

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