Author Archive | Joseph Anthony

The real IRS tax-exempt scandal is who they DIDN’T go after

By on May 18, 2013 in Democracy in Action, Elections, Internal Revenue Service, Politics, Tax Evasion

The rolling sideshow of hearings and revelations about the IRS department responsible for reviewing organizations applying for 501(c)(4) tax-exempt status might not ever get around to dealing with a larger question: Why were some little organizations steamrolled with questions and scrutiny, while major national operations apparently got a pass?

As ProPublica pointed out in a long piece examining what it characterized as dysfunction at the IRS, a review by the Inspector General said that there was insufficient oversight of 200 lower-level employees responsible for examining more than 60,000 nonprofit applications annually.

“The main question raised…is how the Cincinnati office and superiors in Washington could have gotten it so wrong,” the story notes. “The audit shows no evidence that these workers even looked at records from the Federal Election Commission to vet much larger groups that spent hundreds of thousands and even millions in anonymous money to run election ads.”

The tax-exempts that didn’t come under scrutiny, as The New York Times points out, included mega-fundraisers from both sides of the political spectrum, such as Crossroads Grassroots Policy Strategy, Karl Rove’s organization, and the Democratic-oriented Priorities USA.

Organizations are supposed to operate “exclusively” for the promotion of social welfare in order to qualify as a 501(c)(4) tax-exempt group. At least, that’s what the tax code says. But the IRS has given a pass to groups that can show they are not “primarily engaged” in election-related activities.

Admit it: Regardless of where you stand politically, isn’t this one area where you’d like to see the IRS enforce the very letter of the tax code?

Grammy winner Lauryn Hill, celebrity tax evader, gets no love from the IRS

By on May 14, 2013 in Fraud, Internal Revenue Service

It’s pretty easy to skip filing a tax return. Even a second or third return. But sooner or later, the IRS has a habit of catching up with you. Especially if you’re a high-profile rich person, like hip-hop and R&B artist and eight-time Grammy winner Lauryn Hill.

Hill was sentenced to three months in prison and another three months of home confinement after failing to file tax returns in 2005, 2006 and 2007, as reported in the New York Times. She’s supposed to report to prison on July 8.

Her attorney said before the sentencing that Hill had paid more than $900,000 to settle her tax debts and penalties, according to the Huffington Post. Hill didn’t pony up until after federal judge Madeline Cox Arleo criticized her in court in Newark, saying, “This is not someone who stands before the court penniless. This is a criminal matter. Actions speak louder than words, and there has been no effort here to pay these taxes.”

Apparently the payment didn’t mollify Arleo, who obviously felt Hill deserved a little quiet time to think over her bad behavior.

Now that’s a home run: McCourts back in court over billion-dollar Dodgers franchise

By on April 24, 2013 in Creative, Tax Advice

Nasty multi-million dollar divorces make for some great financial insights, especially when they wind up in court.

Today’s lesson: How profitable it can be to own a professional sports franchise, and how the tax code’s preferential rates for capital gains benefit the super-wealthy.

Frank McCourt owned the Los Angeles Dodgers. When he and his wife Jamie divorced, Jamie got $131 million as a settlement.

They were back in court this week. The reason: Shortly after the divorce, Frank sold the Los Angeles Dodgers for $2.15 billion. Jamie’s lawyers say the settlement should be thrown out because she was misled about the value of the team. (Isn’t it entertaining when people fight over hundreds of millions of dollars?)

The tax angle: Court documents show that Frank made $1.278 billion on the sale. His lawyers say he has paid more than $460 million in state and federal taxes on the sale.

If you’re keeping score at home, that’s a combined federal-and-state tax rate of about 36%, or roughly the same percentage that a single person in California would have to pay on ordinary taxable income of more than $90,000.

“Mean”states crush the poor, feds pick up the pieces

By on March 11, 2013 in Socialism in America, Tax Policy

Most talk about tax fairness focuses on federal income tax rates and how much the wealthiest pay. But states collect billions in taxes also, and as Katherine S. Newman writes in the Opinionator blog section of The New York Times, state tax systems tend to be more regressive than the federal system, and most regressive in Southern states and the West.

“Southern states have steadily increased the tax burden on their poorest citizens by shifting the support of the public sector to sales taxes and fees for public services. After California voters passed Proposition 13, which capped property-tax increases, in 1978, Western states began to move in a similar direction,” she writes. “Sales taxes on clothing and school supplies and fees for bus fare and car registration take up, of course, a far bigger slice of a poor household’s budget than they do from the rich.”

Newman points out that we all pay for regressive tax systems in what she calls “mean” states, regardless of where we are. “The more the poor are taxed, the worse off they are, whether they are working or not. We all pay a huge price for this shortsightedness. Medicaid payments, food stamps, disability benefits — all of these federal programs swoop in to try to patch up a frayed safety net. Consequently, the Southern states reap more dollars in federal benefits than they pay in taxes (like Mississippi, which saw a net gain of $240 billion between 1990 and 2009), while the wealthier states — which do more to take care of their own — lose out for every dollar they pay (like New Jersey, which handed over a net of $706 billion over that same period.)”

You can find the whole article, with something to annoy just about anyone, here .

Oscars tax hangover: No free swag bags for celebrities

By on March 8, 2013 in Internal Revenue Service, Tax Advice, Tax Evasion

You probably heard that performers, nominees and others attending the Oscars got “Swag Bags” containing goodies worth $47,802, as Today.com and others reported. A lovely consolation prize for any nominees who didn’t get the statue, fer sure.

But did you hear that people getting the bags have to pay taxes on them?

Really! The IRS has said–you can see it for yourself right here–
that the value of the goodies are income and not gifts.

Says the Service, “…the organizations and merchants who participate in giving the gift bags do not do so solely out of affection respect or similar impulses for the recipients of the gift bags.”

The IRS says that businesses showering goodies on celebrities don’t do it out of affection!Those corporations don’t really, really love them!!

And people, don’t think the celebrities won’t notice that these gift bags are not about love. The IRS also has a bunch of rules about how businesses have to report the value of the gifts on Form 1099-MISC, which is sent to the goodie-bag recipients…and to the IRS.