Archive for the ‘IRS’ Category

It’s Time to Start Your 2020 Mileage Log

Tuesday, January 7th, 2020

I’m going to start the new year with a couple reposts of essential information. Yes, you do need to keep a mileage log:

Last Thursday was the first business day of the new year for many. You may have resolved to keep good records this year (at least, we hope you have). Start with keeping an accurate, contemporaneous written mileage log (or use a smart phone app–with periodic sending of the information to yourself to prove that the log is contemporaneous).

Why, you ask? Because if you want to deduct all of your business mileage, you must do this! IRS regulations and Tax Court rulings require this. Written is defined as ink, so that means you need a paper log or must be able to prove your smart phone log is contemporaneous.

The first step is to go out to your car, and note the starting mileage for the new year. So go out to your car, and jot down that number (mine was 80,008). That should be the first entry in your mileage log. I use a small memo book for my mileage log; it conveniently fits in the center console of my car. It’s also a good idea to take a picture of the odometer;

Here’s the other things you should do:

On the cover of your log, write “2020 Mileage Log for [Your Name].”

Each time you drive for business, note the date, the starting and ending mileage, where you went, and the business purpose. Let’s say you drive to meet a new client, and meet him at his business. The entry might look like:

1/4 90315-90350 Office-Acme Products (1234 Main St, Las Vegas)-Office,
Discuss requirements for preparing tax return, year-end journal entries

It takes just a few seconds to do this after each trip, and with the standard mileage rate being $0.575/mile, the 35 miles in this hypothetical trip would be worth a deduction of $20. That deduction does add up.

Some gotchas and questions:
1. Why not use a smartphone app? Actually, you can but the current regulations require you to also keep a written mileage log. You can transfer your computer app nightly to paper, and that way you can have the best of both worlds. Unfortunately, current regulations do not guarantee that a phone app will be accepted by the IRS in an audit.

That said, if you backup (or transfer) your phone app on a regular basis, and can then print out those backups, that should work. The regular backups should have identical historical information; the information can then be printed and will function as a written mileage log. I do need to point out that the Tax Court has not specifically looked at mileage logs maintained on a phone. A written mileage log (pen and paper) will be accepted; a phone app with backups should be accepted.

2. I have a second car that I use just for my business. I don’t need a mileage log. Wrong. First, IRS regulations require documentation for your business miles; an auditor will not accept that 100% of the mileage is for business–you must prove it. Second, there will always be non-business miles. When you drive your car in for service, that’s not business miles; when you fill it up with gasoline, that’s not necessarily business miles. I’ve represented taxpayers in examinations without a written mileage log; trust me, it goes far, far easier when you have one.

3. Why do I need to record the starting miles for the year?
There are two reasons. First, the IRS requires you to note the total miles driven for the year. The easiest way is to note the mileage at the beginning of the year. Second, if you want to deduct your mileage using actual expenses (rather than the standard mileage deduction), the calculation involves taking a ratio of business miles to actual miles.

4. Can I use actual expenses? Yes. You would need to record all of your expenses for your car: gas, oil, maintenance, repairs, insurance, registration, lease fees (or interest and depreciation), etc., and the deduction is figured by taking the sum of your expenses and multiplying by the percentage use of your car for business (business mileage to total mileage driven). Note that once you start using actual expenses for your car, you generally must continue with actual expenses for the life of the car. Be careful if you (or your family) have multiple vehicles. You will need to separate out your expenses by vehicle.

So start that mileage log today. And yes, your trip to the office supply store to buy a small memo pad is business miles that can be deducted.

IRS Announces 2019 Tax Filings to Begin on January 27th

Monday, January 6th, 2020

The IRS today announced that the 2019 tax filing season for individuals will begin on Monday, January 27th. Tax Returns and payments are due by Wednesday, April 15th (an extension to file is available until October 15th, but payment of tax is still due by April 15th). The full IRS notice is available here.

2020 Standard Mileage Rates Released

Wednesday, January 1st, 2020

Yesterday, the IRS announced the 2020 standard mileage rates. The rates are:

  • 57.5 cents per mile for business use (down 0.5 cents per mile from 2019);
  • 17 cents per mile for medical or moving use (down 3 cents per mile from 2019); and
  • 14 cents per mile driven in service of charitable organizations (set by statute).

As a reminder, keep your mileage log! (Indeed, I’ll have a post on keeping your 2020 mileage log next week.)

The 2019 Tax Offender of the Year

Tuesday, December 31st, 2019

This year really went by fast, but unfortunately there’s no shortage of candidates for the Tax Offender of the Year award. As a reminder, to be considered for the Tax Offender of the Year award, the individual (or organization) must do more than cheat on his or her taxes. It has to be special; it really needs to be a Bozo-like action or actions.

The United States Congress received another nomination. The correspondent noted that Congress has abdicated looking at spending, and that’s been done by both Democrats and Republicans. I agree, but that’s not enough to win this year.

California received two separate nominations. The legislature received one for A.B. 5. That’s the new law that prohibits most independent contractors in the ‘gig’ economy. The law will likely lead to fewer independent contractors (that’s the intent of it), but won’t increase employment and will lead to a lowering of tax collections. I agree completely with the individual who sent in that nomination. However, any impacts will be in 2020 (not 2019), so I think this should be held in abeyance until next year.

The California Office of Tax Appeals ruled that an individual selling into California but with no presence in the state owes California tax. While I expect this ruling to eventually be narrowed by federal courts (potentially being completely overruled), it’s a stupid ruling and will lead to many avoiding dealing with Californians. It’s another penny-wise, pound-foolish outcome from California.

Craig Orrock of Salt Lake City received a nomination. Mr. Orrock is a former IRS employee and a former attorney. We’ll stress the word former because his conduct ensured he can’t be either ever again. From the Department of Justice press release:

Evidence at trial showed that Orrock filed tax returns for the years 1993 through 2015, but did not pay the income taxes reported as due on those returns. Orrock attempted to prevent the IRS from collecting the reported income taxes by using entities, bank accounts, and trusts in other names to hide his income and assets from IRS collection officers, filing frivolous bankruptcy petitions, and filing an offer-in-compromise falsely representing to the IRS that he had virtually no assets.  For example, Orrock used an entity known as Arville Properties LLC to conceal from the IRS his ownership of real property that he sold in 2007 for $1.5 million. In all, Orrock evaded the payment of over $500,000 in federal income taxes.

Mr. Orrock will be paying nearly $924,000 of restitution and will spend 32 months at ClubFed.

Something I’ve stated since I began this blog is that if you want to get in trouble with the IRS, one of the easiest ways to do so is to withhold employment taxes and not remit them. As far as I know, the IRS investigates all such cases.

Lawrence R. Gazdick, Jr. founded an equipment rental business in Dulles, Virginia (near Washington, DC). Mr. Gazdick’s business appeared to be successful, in that he had 70 – 100 employees. He used various names for his businesses (which isn’t an issue), with multiple bank accounts (52 in 9 different banks). He offered health insurance for his employees, with a plan from Kaiser Permanente which cost over $200,000. That’s a business that’s doing well.

Of course, since I’m writing about this, there were some issues. None of his businesses bothered filing employment tax returns, but he was diligent in withholding employment taxes from his employees’ pay. It was only $3.874 million of trust fund taxes (along with an additional $1.477 million of employer FICA taxes). Additionally, Mr. Gazdick didn’t bother to pay Kaiser for the health insurance; the check was “in the mail.”

Mr. Gazdick also didn’t file corporation or LLC taxes. It’s not clear if he needed to file Forms 1120, 1120S, or 1065 for his businesses as he held his businesses to be corporations and LLCs, but something needed to be filed. At least he was consistent: Mr. Gazdick hadn’t filed personal tax returns since at least 2000. (Some tax professional is about to get a lot of business.)

Mr. Gazdick’s business came to the attention of the IRS. This was certain to happen. Consider that employees filed their income tax returns, noting withholding of income tax (and FICA taxes). The IRS won’t find the matching payroll tax returns (Forms 941) from the employer. The IRS will easily get evidence of the problem (either by looking at the W-2s filed with the Social Security Administration and/or getting copies of pay stubs from employees).

Mr. Gazdick had an answer: I’ll just change the name of the business. He used multiple names, likely in trying to keep the IRS at bay. It didn’t work, but not for the obvious reason. (It’s certain that sooner or later the IRS would have looked into the missing payroll tax deposits.)

Mr. Gazdick was previously convicted of a felony. Convicted felons are not allowed to possess firearms. Mr. Gazdick had a firearm for his business. That came to the attention of a task force formed under “Project Safe Neighborhoods.” The goal of Project Safe Neighborhoods (which began in 2001) is reducing violent crime. The investigation likely began because of the gun. A helpful hint to anyone who is going to commit a felony with a high likelihood of investigation: Do not commit another felony which also has a high likelihood of investigation. But I digress….

It appears that the Project Safe Neighborhoods investigation led to the tax investigation. The tax case was pretty much a slam dunk given the facts (that I noted above). Mr. Gazdick has pled guilty, and has promised to make restitution of the $5.35 million in employment tax loss and the $200,000 which wasn’t paid to Kaiser. While sentencing was supposed to have occurred in October, it appears to have been delayed.

And that’s a wrap on 2019. I wish you and yours a happy, healthy, and prosperous New Year.

Congress Gets in the Christmas Spirit: Tax Extenders Pass

Friday, December 20th, 2019

“It’s looking a lot like Christmas,” is how one Christmas tune begins. Here in Las Vegas, that means it’s cold (for Las Vegas), and the few deciduous trees in town are now leafless. But Congress got in the Christmas spirit, passing tax extenders. There are a lot of provisions, so let’s get to the ones most likely to impact you.

1. Three ObamaCare taxes are gone: the medical device excise tax, the 40% excise tax on high-cost employer provided health coverage, and the annual fee on health insurance providers. ObamaCare continues to go into the garbage can of history on a piecemeal basis.

2. There are numerous changes to retirement programs. The biggest change is that the age for required minimum distributions has been increased to 72 from 70 1/2. This change is effective for distributions required to be made after December 31, 2019 for employees and IRA owners who attain age 70 1/2 after December 31, 2019.

3. It used to be that if you had cancellation of debt income from your primary residence, you could exclude that from taxation. That vanished–but it’s back! This provision is retroactive to 2018, so if this impacted you an amended return may be in the future. This provision sunsets at the end of 2020 (unless Congress extends it again).

4. Mortgage insurance premiums used to be deductible, but that went away. That’s also back, retroactive to 2018; if this impacts you an amended return may be in your future. This provision sunsets at the end of 2020.

5. The medical expense deduction for 2019 and 2020 returns will be based on 7.5% of AGI, not 10% of AGI.

6. The Tuition and Fees deduction is back for 2018 (retroactive) through 2020.

7. The tax credit for construction of energy efficient homes is back for 2018 (retroactive) through 2020.

Those are just the highlights; there are numerous other provisions. This legislation still must be signed into law by President Trump (he has indicated he will sign it). I would expect tax software companies to have made the appropriate adjustments in their software by the end of January.

An obvious question is whether you should file an amended return if you’re impacted by one of these changes for 2018. The answer will be, “It depends.” The reality is that if the issue is major (you’re a home builder and can take the tax credit for energy efficient homes, or you had large cancellation of debt income from your personal residence) the answer will undoubtedly be yes. However, let’s say you paid $300 of mortgage insurance (and you did itemize) in 2018. Let’s further assume you’re in the 22% tax bracket. That means your potential tax savings are $66. If a tax professional prepares an amended return, he or she will have to charge you. Now, for a change like this the cost will generally be minimal (it should take very little time), but tax professionals must charge for their time. Let’s say the charge is $60. Then you have to add in the cost of postage (all amended returns must be mailed to the IRS) which means certified mail, so that will add in another $6. So you would be spending $66 to save $66 in my hypothetical — a wash. Thus, each individual will need to look at their unique situation.

It would be far better for Congress to drastically simplify the Tax Code or not have extenders; simply pass legislation at the beginning of each year rather than the end of it. The good news for 2020 is we do have certainty on these extenders for next year.

FOIA Lawsuit Looks at IRS Procedures on Representative’s Personally Identifiable Information

Monday, December 9th, 2019

One of the tax blogs that I faithfully read is Procedurally Taxing. Today, they noted a lawsuit against the IRS regarding the IRS’s procedures when a third-party calls them for taxpayer information. The author of the post is a tax attorney, Nick Xanthopoulos; he’s joined in the lawsuit by Professor Keith Fogg of Harvard University.

Suppose I have an IRS Power of Attorney (POA) or Tax Information Authorization (TIA) for a client, and I request information from the IRS (this could be a transcript, whether a payment is received, putting a client in “Currently Not Collectible Status”, having a misapplied payment applied correctly, etc.), the IRS agent will ask for my personally identifiable information at the start of the phone call (my social security number, date of birth, and occasionally some other information). This is in addition to what the IRS Internal Revenue Manual (IRM) (the IRM is the book of procedures IRS employees are supposed to follow) says is required to verify that I am authorized to represent a taxpayer (the taxpayer’s name, social security number, the tax year and forms we are authorized for, and our CAF number (an identifier assigned by the IRS to each tax professional who files a POA or TIA with the IRS)). Why does the IRS need my social security number? As today’s post notes:

In January 2018, the IRS changed the procedure with no advance notice, and obviously, no opportunity for comment by the effected parties.  Since then, IRS employees begin nearly every phone call by forcing practitioners to say our own SSN, date of birth, and other personal information.

The IRS said they needed this information to make sure taxpayers were not victims of identity theft. Well, that’s well and good, but what about tax professionals being victims of identity theft? This information makes its way into the clients files; the post notes that the author has obtained recordings of calls through Freedom of Information Act (FOIA) requests. In two of these calls, one of the authors’ social security numbers was on the recorded call.

The tax professional community hasn’t thought that this ‘enhanced’ procedure is a great idea. “Practitioners should never be forced to choose between representing someone as effectively as possible and protecting ourselves from identity theft or other misuse of our own personal information,” is how the author puts it. So the author of the post filed a Freedom of Information Act request to see the IRS’s precautions on this information. The IRS sent the authors to a redacted version of IRM, claiming that releasing the whole thing would disclose guidelines for law enforcement investigation or prosecutions, and such disclosure could lead to circumvention of the law. The authors appealed, but the appeal was denied.

The authors filed a lawsuit in US District Court for the District of Minnesota. Their goal is not monetary; rather, it is, “…to find out answers to these questions so that the practitioner community can begin to have a voice in how its information is used by the IRS and protected from abuse.”

Do I have confidence in the IRS protecting my personally identifiable information? I think the IRS will try, but given their past results I don’t trust them at all. I am hopeful that the authors will prevail in their lawsuit and some transparency will throw open some IRS procedures.

IRS Criminal Investigation Has a 91.2% Conviction Rate

Thursday, December 5th, 2019

Here’s a helpful hint to anyone who commits a serious tax crime: If IRS Criminal Investigation (CI) comes after you, there’s a 91.2% chance that you will be heading to ClubFed or otherwise be convicted. As poker players say, ‘Those are betting odds.’ That’s just one of the highlights of IRS CI’s annual report.

There are only 2,009 special agents (down from 2,019 in 2018). There were 1,500 investigations started, with 942 prosecutions recommended, and 848 resulting in sentencing. As you would expect, most of the investigations relate to tax (75.1%), while 11.3% are narcotics-related, and 11.9% are non-tax. (A few investigations, 1.4%, are not categorized.)

The sources of investigations run the gamut: 28% are from the US Attorney’s Office (aka the Department of Justice), 26% from other federal agencies, 15% are internally developed (within CI), and 12% come from Bank Secrecy Act information. Other sources include IRS civil (from IRS Revenue Agents and others involved in audits), state and local government, and the general public.

The annual report highlights several cases, including the indictment out of Las Vegas of several individuals who allegedly filed $1.1 billion in false claims for refundable renewable fuel tax credits. They also allegedly laundered $3.1 billion.

If you’re at all interested in CI, and what they work on, the report makes for interesting reading.

Deja Vu All Over Again, Again

Thursday, November 7th, 2019

Last year I wrote a post noting the following:

A client filed his tax return on October 2nd. He had a balance due (he had made an extension payment, but he still owed some tax). He paid by having his bank account electronically debited with the filing of his tax return. In today’s mail he received a CP14 notice (dated today) alleging he hadn’t paid his balance due. Yikes!

My client was upset. “Russ, you forgot to have my bank account electronically debited.” No, I didn’t forget, and the return shows his payment being accepted for processing. I had a Tax Information Authorization for my client, so I ran an Account Transcript and it showed a $0 balance. My client was relieved, but there appears to be a systemic IRS issue.

The payment went through on October 2nd, but the IRS posted the tax due first (dated October 22nd) without posting his payment. Yet the payment was made, and my client should have never received this notice. It wasted both of our time for no good reason.

Well, history has repeated itself (again). I have two clients (so far) who filed their returns in October, paid by electronic debit with the filing of their returns, and who received CP14 notices stating they owed tax. They didn’t–the payments went through and the IRS shows they received the payments. Yet again, my clients were annoyed (with the bureaucratic stupidity) and both the clients and I had to waste our time chasing down an issue we shouldn’t have had to.

I concluded my post last year with the following:

Several years ago this was an issue for April filers; the IRS corrected the problem by allowing an additional ‘cycle’ before sending out CP14 notices. I hadn’t seen this issue before for extension filers, but it appears we have a case of deja vu all over again. I reported this to the IRS Systemic Advocacy Management System. If you’re a tax professional and run into this issue I urge to to report it, too.

Yes, I reported this again to SAMS. Last year, I was contacted by the Taxpayer Advocate Office/SAMS about this issue. It seems they were not successful in resolving the matter. Hopefully they will be this year.

If you’re a tax professional and your clients receive an erroneous CP14 notice based on this fact pattern, I urge you to report it to SAMS.

It Looks Just Like the L.A. Freeway System!

Sunday, July 14th, 2019

One of the things I love about living in Las Vegas is not dealing with the Southern California traffic. I remember running into a horrendous traffic jam at 2 a.m. I remember the ten mile drive that took two hours. I don’t miss that in the least. Yes, there’s some traffic here in Las Vegas–I complain when my commute home takes twenty minutes instead of the usual twelve minutes–but it’s really benign when compared to Los Angeles.

I bring this up because the Taxpayer Advocate released a “roadmap” of what happens with a tax return. Here it is:


There are some comments I’d like to make about this:

1. Yes, our tax system is that convoluted. We should have a simple, straightforward system. Our current Tax Code reminds me of differential equations (and yes, I took that in college).

2. There are important steps that are left out of the roadmap. One of the items listed in “Tax Return Processing” is IRS Issues Math Error Notice. When I think of a math error, I think of 2 + 2 = 5. Those kinds of math errors are appropriate for a math error notice. However, one of my clients just received a math error notice where the IRS inserted a $300 penalty for no particular reason. That’s not appropriate for a math error notice (at least, I don’t think it is), yet if my client didn’t write the IRS within 30 days of receiving that notice it would be next to impossible to have that corrected. Indeed, the Taxpayer Advocate has, in the past, complained about math error notices.

3. The equivalent of traffic jams do occur. One of the current issues taxpayers and practitioners face is slow response time on the IRS reading its mail. Consider my client’s response to the math error notice. She received the notice on July 10th, and on July 11th mailed the response (using certified mail, return receipt requested). It was received on July 13th. The average IRS response time for reading correspondence is 14 weeks. That means it will likely be November 1st before my client receives a response to the erroneous penalty on a math error notice. And suppose a second letter is needed (which happens). The lack of timely responses by the IRS negatively impacts all taxpayers (and the IRS). I have a second client who received a late filing penalty for filing a tax return without an extension. The extension was filed, but it wasn’t processed until after the tax return was processed! That client had to file a request for abatement for the penalty. Here’s a situation where the IRS’s internal systems should have automatically abated the penalty, yet my client must mail another piece of paper to the IRS, wait 14 weeks for it to be read, and hope that the agent who reads it understands that this was an IRS error.

4. The IRS’s automated systems hurts “edge-case” taxpayers. My mother is not that computer literate. Yet she is supposed to pay her taxes (like all of us). Now, she happens to have a son who is a tax professional, but what if she didn’t? Would she really be able to determine how much of her social security is taxable? Or how to compute the new Section 199A deduction on her dividends that qualify for that deduction?

5. Did I mention that the Tax Code (and how it works) is far too complex? I’m pretty sure I did.

Most of the blame does not fall to the IRS; it falls to Congress, which enacts the laws that have resulted in this mess. Additionally, Congress has not adequately funded the IRS. These are issues that need to be resolved, but cannot be resolved by the IRS.

Should a Taxpayer be Liable for Tax on Income She Didn’t Receive?

Saturday, June 22nd, 2019

Not even the IRS could go after someone for income they didn’t receive, right? Well, wrong. And when the taxpayer filed a lawsuit to reverse the result, she lost. She appealed to the Eleventh Circuit where the Court had a slightly different view of taxes than the government.

The story begins when her ex-husband is subject of a lawsuit (they were married at the time). It became clear the lawsuit would last longer than the marriage, and the couple agreed that they’d be equally liable for the judgment (if any). The couple divorced; later, the ex-husband settled the lawsuit for $600,000. He paid that to the plaintiff; he also filed a claim on his tax return for the $300,000 he paid. The IRS had no problem with that.

Per the divorce agreement, she reimbursed him $300,000. She also took a deduction under Section 1341 of the Internal Revenue Code. The IRS said no you don’t. She asked for relief in court. The district court granted summary judgment to the IRS. She appealed.

The Appellate Court looked at what’s necessary for relief: To obtain relief under § 1341, a taxpayer must satisfy four requirements.

First, an item of income must have been included in a prior year’s gross income “because it appeared that the taxpayer had an unrestricted right to such item.” § 1341 (a)(1). Second, the taxpayer must have later learned that she actually “did not have an unrestricted right” to that income. See § 1341(a)(2). Third and fourth, the amount the taxpayer did not have an unrestricted right to must have exceeded $3,000 and be deductible under another provision of the tax code. Fla. Progress, 348 F.3d at 957, 959. If the taxpayer can demonstrate these elements, then she has a choice between two options: “[s]he can deduct the item from the current year’s taxes, or [s]he can claim a tax credit for the amount [her] tax was increased in the prior year by including that item.”

The government disputed whether the taxpayer had an unrestricted right to the income. The lawsuit claimed that there was misappropriation of funds. “But here, the record lacks any proof that [the ex-husband] knowingly misappropriated income, since his settlement agreement with [B] expressly disclaimed any wrongdoing.” The government also claimed that she had no presumptive right to the ex-husband’s income. “First, even if the government’s assertion were correct, it makes no difference to the § 1341 analysis. What matters is whether [she] sincerely believed she had a right to [his] income, not the correctness of her belief.”

The next part of Section 1341 is for the taxpayer to establish that “after the close of a taxable year, ‘the taxpayer did not have an unrestricted right’ to some amount she initially reported as taxable income. To make this showing, the taxpayer must demonstrate that she involuntarily gave away the relevant income because of some obligation, and the obligation had a substantive nexus to the original receipt of the income.” The government said that she voluntarily gave away the income. The Court disagreed.

[Her] situation is materially indistinguishable. As with Barrett, her obligation to pay arose not from a final judgment, but from an agreement she entered in good-faith to avoid litigation. And it would be equally as “ludicrous”—as it was in Barrett to say that Barrett voluntarily paid his $54,000—to conclude that [she] voluntarily paid $300,000 of her income without regard to any legal obligation.

Indeed, she initially opposed paying [her ex-husband] for any liability arising from the…lawsuit. Only after [the plaintiff in the lawsuit] threatened her with litigation did she agree to be bound to do so and enter into Article 5 of her separation agreement…

[She] also paid an attorney to advise her of her rights, and that attorney told her that she had an “obligation” to pay [the plaintiff]. Under these circumstances—and particularly in light of the desirability of fostering settlements without litigation—[she] did not need to wait to be sued before settling and paying for her payment to be considered involuntary. Because the record reflects [she] reasonably anticipated litigation and settled in good faith in the shadow of litigation, her $300,000 payment was involuntary for purposes of § 1341.

The Court also noted that the obligation to pay must relate to the original receipt of income, and that she clearly established that.

There’s one more element that must be met:

Finally, to qualify for § 1341 relief, Mihelick must show that her $300,000 payment is deductible under another provision of the tax code. Fla. Progress, 348 F.3d at 958-59. Mihelick can meet this element, as she can deduct her payment under 26 U.S.C. § 165(c)(1), which allows deductions for an individual’s uncompensated “losses incurred in a trade or business” during the taxable year.

Given that the ex-husband was the CEO and majority shareholder, and that the lawsuit alleged that he breached his fiduciary duty while acting as CEO, the lawsuit related to the income and can be deducted.

The Court began the decision as follows:

Inscribed above the main entrance of the Internal Revenue Service office in Washington, D.C., is a quotation from Supreme Court Justice Oliver Wendell Holmes Jr.: “Taxes are what we pay for a civilized society.”…An admirable outlook, yet even Justice Holmes would likely agree that it is uncivilized to impose taxes on citizens for income they did not ultimately receive. But that is precisely the result the government asks us to uphold today. [citation omitted]

The Court rightly chastised the IRS and US government for being uncivilized.

Case: Mihelick v. United States