Taxable Talk

It’s time again to be considered for that most prestigious of awards, the Tax Offender of the Year. To be considered for the Tax Offender of the Year award, you must do more than cheat on your taxes. It has to be special; it really needs to be a Bozo-like action or actions.

Coming in second was Mark Leitner. Mr. Leitner felt that the government shouldn’t lean on him, so he filed liens against the government…to the tune of $48.489 billion from seven individuals involved in prosecuting him. Mr. Leitner is not enjoying that money (those liens were, as you would imagine, quashed); instead, he’s spending some time relaxing at ClubFed.

Coming in third was Norma Coronel. Ms. Coronel gave birth to one child in December 2002. However, she thought that she could do better on her tax return by claiming she gave birth to 19 children…all at once. That truly Bozo tax fraud got her the joy of repaying, with interest, the over $300,000 she received from the IRS.

I’m giving a dishonorable mention to the IRS Automated Underreporting Program (AUR). I’ve had several clients who have responded to notices from the AUR group, and the AUR group, when writing back, helpfully notes that they’ve reconfigured the amount that the clients allegedly owed. The trouble is that the AUR group ignores the correspondence from the client, and simply restates the amount owed. I’m going to be sending Nina Olson, the National Taxpayer Advocate, a letter on this issue; I’ll post a copy of the letter in the blog in the coming weeks.

This year’s winner has a proud history; indeed, without them we likely wouldn’t be here. I’m talking about the United States Congress, who have moved up from being runner-up the past two years. Congress, especially the Senate, forsook its duties. Consider the budget passed by the US Senate…but that would be problematic as the US Senate didn’t pass a budget in 2009 or 2010 and waited until the closing days of December to actually pass one. However, these are minor issues in comparison with the major problem: The needless and horrible complexity of the US Tax Code.

Nina Olson, the National Taxpayer Advocate, has noted the problem year after year in her reports to Congress. For example,

The National Taxpayer Advocate on numerous occasions has identified the complexity of the tax code as the most serious problem facing taxpayers and urged Congress to simplify it. In this section, we discuss the sources and impact of code complexity and the practical obstacles to simplification. In an accompanying legislative recommendation later in this report, we outline principles and proposals that we encourage Congress to consider as it explores tax reform options.

In 1986, Congress simplified the Tax Code. It’s high time again for another round of simplification. Consider one of my areas of practice, dealing with individuals with foreign financial accounts. Not only do those individuals now have to file an FBAR (Form TD F 90-22.1), they must repeat that information on Form 8938 (if they have sufficient foreign financial accounts). I don’t blame the IRS for this duplication. Rather, I blame Congress. Congress enacted the laws requiring these forms; it is Congress that needs to enact laws that would simplify the Tax Code.

I’d like to see a simple, fair Tax Code. This is likely one of the few issues where the Tea Party protesters and the Occupy Wall Street protesters would agree. Again, consider Form 8938. The instructions note that the estimated average time to complete this form is one hour, five minutes. And that’s just one form. No wonder I’m not worrying about my employment.

I’d like to be put out of a job–at least, on the tax preparation side. Realistically, I doubt that will ever happen: There will still be plenty of complex corporate and business returns that need completion.

Today, taxpayers who do not have simple situations–and that’s millions of Americans–have tremendous difficulties completing tax returns on their own. Albert Einstein stated that, “The hardest thing in the world to understand is the income tax,” and that was over 60 years ago! The situation today is far, far worse and the blame is squarely with Congress. Unfortunately, 2012 is an election year and I believe there’s zero chance of anything coming out of this Congress. Indeed, President Obama has shown no inclination at simplifying the Tax Code. We likely need new leadership in Washington to ease the pain of all Americans.

And that’s a wrap on 2011. Everyone have a safe, happy, and healthy New Year. I’m sure I’ll find plenty of other Bozos to write about in 2012.

Today’s closing price for silver is $32.72 an ounce. Meanwhile, Gold is $1,749.35 an ounce. So how can silver be better than gold?

If you’ve been a reader of this blog, you’ve seen me write numerous times about California’s tax and economic policies. Bluntly, if California were a corporation, it would be delisted from the Pink Sheets. (For those unfamiliar with the “Pink Sheets”, that’s the home for stocks that get delisted from the NYSE, American Stock Exchange, or NASDAQ.) Meanwhile, the only recipe that Democrats in Sacramento have is to increase taxes.

My tax bite is roughly 10% to California. For every dollar I make, ten cents goes to Sacramento. (Yes, I get a benefit from that in that state income tax is deductible on federal tax. However, because of the Alternative Minimum Tax even that benefit is capped.) For the past few years I’ve considered if I could move my business to a friendlier environment. Earlier this year, I decided to do so.

I’ve sold my house in Irvine, and am in the process of purchasing a home in the Las Vegas area. I will be in a much friendlier business environment, with a lower cost of living. The home I’m purchasing is nearly double the size of my current home and costs almost 50% less than what I sold my current home for.

There comes a point where decisions are forced on you. With the growth of my business, I looked at possibly hiring another tax accountant in 2010. When I ran the numbers, I found that I would lose money by hiring a productive tax accountant. That’s because of all the regulations and costs that I would immediately incur if I had an employee. I’m not stupid: If I lose money by hiring someone, I’m not going to do it.

Yet my business was (and is) growing, and I had to do something. As you may know, I’m adding a partner (Aaron Lion, E.A.). He’s based near D.C. rather than California. As of a week from now, I will have executed my own Escape from California.

Democrats in Sacramento constantly say that with all of California’s advantages (and the state does have a lot: great climate, a large diverse population, and diverse industries) that increasing taxes doesn’t impact employment. That’s hogwash. It’s driven large companies (e.g. Nissan) to Tennessee. It’s driven me to the Silver State, Nevada. Sure, I’m just one job but the money I earn goes to support others’ incomes. That will still be the case, but not in the Golden State, California.

With the movers coming tomorrow, and everything that’s been happening with the move and with what will happen over the next two weeks, it’s likely that posting will be minimal until mid to late December.

I live in earthquake country. The notorious San Andreas Fault is about 55 miles away (it runs just to the north and east of San Bernardino); the Newport-Inglewood Fault (which caused the 1933 Long Beach Earthquake) is just ten miles from my house. Scientists think a major quake on the San Andreas Fault will likely come sooner rather than later (the southern-most section has not had a major earthquake in 300 years, and is thought to be far overdue).

But not just Southern California faces natural hazards. Earthquakes can occur in the Midwest (the New Madrid Faultzone), the South (Charleston, SC), and Virginia. That’s not to mention tornadoes and hurricanes.

With Hurricane Irene threatening the East Coast now is a good time to remember some tips for disaster planning. Have a disaster kit, have a plan, including an out-of-area contact (I know the importance of this from living through the Northridge Earthquake), and make sure you backup and store in a secure place your computer data.

For those living in earthquake country, consider earthquake insurance. In California, you must purchase this from the California Earthquake Authority (either directly or indirectly). If you live in an area that can flood, consider flood insurance. Make sure your homeowners/renters insurance coverage is up to date, too.

While there are casualty loss deductions available after the fact, its better to be prepared. Natural disasters will happen, and in this case an ounce of prevention is worth far more than a pound of cure.

While on vacation I spoke with a good friend of mine from Illinois. A couple of years ago his firm had a sales tax issue with the Illinois Department of Revenue. The Illinois DOR accused his firm of not paying all his sales tax on a timely basis, and after audit accused him and his firm of owing hundreds of thousands of dollars.

The audit apparently lasted months, and in the end the DOR and my friend’s firm couldn’t come to an agreement. The case ended up in court with my friend eventually winning. It was something of a Pyrrhic victory, though: Fighting the case cost him $89,000 (that includes the cost of penalties and interest paid to the Illinois DOR and attorney’s fees).

My friend was noting that he had read my blog post on being penny wise and pound foolish. After this case occurred everything he sends to a government agency is sent via certified mail, return receipt requested. Yes, the original issue with the Illinois DOR came about because he couldn’t prove he had timely mailed a sales tax return. He noted that he learned this lesson the hard way.

It’s your choice, but my friend likes the idea of not paying $88,994.21 needlessly. I urge you to use certified mail, return receipt requested (or timely file electronically). It really is a no brainer.

It’s time for my annual vacation. If something earth-shattering in the tax world happens while I’m relaxing, I’ll take time out to post on it. Otherwise, enjoy the fine bloggers listed in the blogroll on the right. I’ll be back on Tuesday, August 9th.

Last Sunday, my computer decided that it wanted to take a vacation. Now, I believe there’s a religion where mechanical devices have souls (Shintoism?), but I don’t believe that. But try as I might my computer had enough of me.

It crashed.

Luckily, I learned the lesson of backing up data years ago. Not only did I have backups (in multiple places), but I’ve restored files off of them. That’s an important part of backing up your work–making sure you can restore your files. Otherwise, what’s the point of backing up your data?

As it turns out, my computer’s “illness” lasted about three days. That wasn’t the end of the world (thank goodness this isn’t early April or October), but it was an annoyance.

The reason I bring this up is that I’ve seen many clients who do not back up their computer’s data, and who have never tried to restore from their backups. My corollary to Murphy’s Law is that your computer will die at the least opportune moment. Thankfully for me, that didn’t happen this time. I hope that will also be the case for you.

It’s been a while since I’ve proofed my blogroll, and I’ve been negligent in adding some well-deserving blogs and pruning some deadwood.

Taxdood publishes “Taxes in the Back.” A New York-based attorney, he focuses on gambling, international issues, and other items that pique his curiosity.

Jack Townsend published “Federal Tax Crimes.” Mr. Townsend focuses on issues relating to federal criminal tax matters, including the FBAR.

Knox Marlow, a retired tax attorney, has just begun Tax Didactic. Mr. Marlow said in his inaugural post that his wife can handle only so many of his vents on tax policy, so he started a blog. I hope his wife continues in that vain as I am enjoying reading his new entry into the tax blogosphere. Indeed, all three of these blogs are well worth your time.

This post has nothing to do with taxes, but everything to do with customer mis-service. You’re forewarned.

On Tuesday, May 10th, I logged on to my blog and attempted to write a post. I was unable to save the post — the “Publish” button didn’t appear. I couldn’t figure out a reason, so I called technical support. They didn’t know of anything (it was clearly a call to India), but did let me know that my hosting company, 1&1 Internet, had done an upgrade. They suggested it might be a billing issue.

So I called billing, and discovered that the problem was that I had exceeded my space limitation. I was guilty as charged, but when I went with 1&1 (after my then hosting company announced they were going out of business) I was told that I could upgrade my space quickly. So I told the individual I spoke with I was more than willing to do that.

Before we get into the adventure that’s about to follow, I need to point out that I had exceeded my space limitation for several months. However, 1&1 never told me or I would have immediately taken care of it.

In any case, I was transferred back to India, where the helpful tech person put through the order to increase my space allocation. I was told that the order would take 24-36 hours to process, and then the blog would need to be transferred (they’d walk me through that on the phone).

On Thursday, the order still hadn’t processed. I called technical support and they admitted that the order had failed due to a problem on their end. The tech support person I spoke with told me that they had “escalated the problem so that it would be resolved.” I should hear back within 24 hours.

Well, I didn’t hear anything, so I called back on Monday, May 16th. I asked what the status was, and I was told that nothing had been done; that there was still a problem on their end. I asked to speak with a supervisor, and I was told the supervisor was unavailable. I told the individual I spoke with (again, from India) that I needed this problem resolved, and I expected to be contacted by a supervisor by the end of the day. He said he’d pass on what I said.

I never heard back from anyone at 1&1.

My partner, who is far more tech savvy than I am, took the lead in finding a new hosting company (we began looking on Tuesday, May 17th). On Wednesday, May 18th we signed up with them; on Thursday, May 19th, we began the process of moving the blog. With the aid of Brian Cribb (who has helped me in the past with WordPress issues), we moved the blog by yesterday. We then updated the dns servers and tonight everything is back to normal (other than the two weeks off).

As for 1&1, I shouldn’t say I haven’t received anything from them as that’s not completely accurate. I have received two emails. The first even had the name of their General Manager, Frederick Iwans, listed at the bottom. Mr. Iwans wished me “best regards” as I could win $25,000 by telling 1&1 in 300 words or less where .com will take my business. Here’s my entry:

With 1&1 Internet, http://taxabletalk.com would be taken out of business.

I suspect I won’t be winning one of the prizes.

Today 1&1 noticed that we’ve moved taxabletalk.com off their servers. They note that I can contact their support team for assistance. Hmmm, I think waiting for Godot might have a better chance.

If you can see this post, you’re seeing Taxable Talk hosted by my new hosting company.  New posts are coming tomorrow (Thursday), along with a rather scathing review of a certain hosting company. That post could be titled, “Indian Customer Service Unserves You.” It’s also very apparent to me that they don’t care.

Anyway, all is almost back to normal, and tomorrow is just a day away.

My current hosting company has decided they don’t want my business. I am being forced to switch companies (something I’ll write about next week). For now, we will likely be going down and then reappearing like the proverbial Phoenix and be back in business next week. Given the way dns servers update, and everything that must be done, I’m guessing we’ll be back in business fully next Tuesday.

Again, I am extremely annoyed about everything that has happened but we should be up and running again soon.