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No, the IRS Will Not Be Cool with Your Request for Bogus Refunds in Order to Pay Your Gambling Debts

If you find yourself in a bit of tax trouble, the IRS is more than happy to work with you. They gave all those UBS tax evaders all the chances one could ask for. They are giving small nonprofits a break on submitting their 990s. Hell, they are opening regularly on Saturdays.

The best thing to do if you find yourself in a pinch is call them, explain the sitch and we’ll bet you dollars to vegan donuts that Doug Shulman and Co. will work it out with you.


Having said all that, it’s extremely unlikely that the Service will work with you if, say, you attempt to obtain a couple million in bogus refunds to pay off your gambling debts. You do this under the assumption that the U.S. Government will gladly take an IOU until you get around to scraping it together. Who hasn’t gotten a little careless during football season a time or two and needed to commit a federal crime to make things, amiright?

Federal authorities this week arrested a former Los Angeles County worker who allegedly used the personal information of more than 150 welfare applicants to file nearly $2 million in fraudulent claims for tax refunds.

Trang Van Dinh, a 62-year-old resident of Glendale, worked for the county for a decade and filed the returns in a desperate attempt to pay gambling debts, county auditors said.

[…]

His arrest comes months after Dinh was fired from his county job after acknowledging wrongdoing in an interview with county investigators, said Guy Zelenski, chief investigator for the county auditor-controller. County officials spoke to Dinh after IRS investigators notified them of their suspicions.

“He thought he could pay the IRS back and he would have no problems,” Zelenski said.

No problems, like facing 220 years in FPMITA prison problems?

Fired L.A. County worker arrested in tax fraud case [Los Angeles Times]

Berkshire Hathaway: Wall St. Journal Is Wrong About Our Taxes on Bank of America Deal

Last week, folksy octogenarian (81 years today!) billionaire Warren Buffett announced that he was going to invest $5 billion in Bank of America. Some are questioning The Oracle’s intentions with this investment but considering WB came up with the idea in a place where all good ideas originate – the tub – it’s plausible that this investment will turn out okay for Berkshire shareholders (isn’t that the point?).

Regardless, some don’t think a guy who says that he doesn’t want to be “coddled” and needs – nay, WANTS! – to pay higher taxes shouldn’t be throwing around money and should just put his money where his Blizzardhole is. Accordingly, The Wall St. Journal published an editorial today accusing Buffett of being a little dodgy when it comes to Berkshire’s tax liability as it relates to his BofA investment.

Mr. Buffett’s recent decision to invest in Bank of America represents another tax-avoidance triumph for the Berkshire chief executive. U.S. corporations are subject to a top federal income tax rate of 35%, the second highest in the world. But the Journal’s Erik Holm notes [Ed. note: Thanks for linking!] that Mr. Buffett and the Berkshire bunch won’t pay anything close to that on their investment in BofA preferred shares.

That’s because corporations can exclude from taxation 70% of the dividends they receive from an investment in another corporation. This exclusion is intended to prevent double- or even triple-taxation as money is earned by one company, paid to another company and then ultimately paid out to shareholders. The policy makes sense; we only wonder why the exclusion isn’t 100%.

With the 70% exclusion for Mr. Buffett and his fellow shareholders, Berkshire will enjoy an effective tax rate of 10.5% on the $300 million in dividends it will receive each year from Bank of America.

So, a 10.5% effective rate. Not bad, right? Well, Berkshire says it’s wrong and issued a brief press release to rebut the Journal’s op-ed account and not so subtly suggests that they bone up on tax law:

An editorial in today’s Wall Street Journal says that “Berkshire Hathaway will enjoy an effective tax rate of 10.5% on the $300 million in dividends it will receive each year from Bank of America.” That statement is incorrect.

Virtually all of the stocks that Berkshire owns are held in its property-casualty subsidiaries, and that will be the case with the Bank of America preferred.

The tax treatment for dividends paid by U.S. corporations to property-casualty insurance companies was materially changed by a law passed in 1986. The changes were described in detail in the chairman’s letter included in Berkshire’s 1986 annual report.

A minor change in rate was made in 1993. Since that time dividends that insurers receive from U.S. companies incur an effective tax rate of 14.175%. For Berkshire, that rate will apply to dividends it receives from Bank of America.

So, in other words, suck it editorial board. If you know Buffett like you should know him, then you know that if he could save that 3.675%, he would.

Buffett’s Latest Tax Break [WSJ]
Berkshire Hathaway Inc. News Release [Business Wire (a Berkshire Hathaway Compay!)]