July 18, 2018

Internal Revenue Code

Tax Case Shows It’s Better To Give Than To Receive Notification of an IRS Audit

The Bible says God loves a cheerful giver, and the U.S. Tax Code says a cheerful giver loves the charitable contribution deduction. But according to the outcome of the recent case Durden v. Commissioner, the Tax Court hates both God and cheerful givers. According to an article in The Tax Adviser, here's what happened. In […]

Politicians Incorrectly Demonizing “Tax Loopholes” Is Old Hat

Today, Christopher Bergin explains how our elected officials butcher the term "tax loophole": For now, let’s look at the Republicans (trust me, I plan to get to the Democrats, too). When Republicans talk about tax reform, they say they mean that they want to close loopholes to increase revenue and make the system better. OK, […]

Tax Professionals Should Keep One Simple Thing in Mind When Assessing Their Performance

It’s getting to be that time of year, after all:

We’re doing reviews performance reviews, and the first item to assess is, “Knowledge and application of applicable accounting procedures and law.” First you check the appropriate box: Needs improvement; Meets expectations; Exceeds expectations; Far exceeds expectations. Then you have to write a comment. Here’s what I’ve got:

The Internal Revenue Code is 4,212 pages in 2 point font, I think the fact that I know any of it qualifies me to check the box – FAR EXCEEDS EXPECTATIONS

Other responses are welcome. Or send them our way.

What Is the Most Difficult Sentence to Understand in the Tax Code?

[caption id="attachment_19691" align="alignright" width="260" caption="It\'s in there somewhere"][/caption]

The IRC is probably the last thing many of you want to think about right now but, yes, I’m going there.

David Foster Wallace’s posthumous novel, “The Pale King“, is set in an IRS office in Peoria, Illinois and you’ll be shocked – SHOCKED! – to learn that the protagonist is fighting extreme boredom at his job. Wallace did extensive research prior to writing his final book including taking accounting classes at Illinois State University and carrying on “lively correspondence with tax lawyers and C.P.A.’s, peppering them with questions about the Tax Reform Act of 1986, compliance studies, I.R.S. office furniture, and an exotic tax shelter called ‘the Silver Butterfly,'” the Times reports.

One of the accountants Wallace corresponded with was Stephen Lacy who wrote this about Section 509(a):

“[L]egendary as the most difficult sentence to understand in the tax code,” adding: “I find that although I can never quite understand what it says, after I read it several times and concentrate, I can actually get into a kind of weird Zen-type meditation high! (Then again sometimes it provokes a profound anxiety attack.)”

“Legendary,” not only because its Mr Lacy’s drug of choice, but because Ronald Reagan quoted this passage back in June of 1986 when he set forth on his divine mission of reforming the tax code. A mission he ultimately achieved and thereby canonizing himself in the hearts and minds of many (can’t you picture the shrine in Grover Norquist’s house?). Anyhoo, here it is, in all its glory:

For purposes of Paragraph (3), an organization described in Paragraph (2) shall be deemed to include an organization described in Section 501(c) (4), (5), or (6) which would be described in Paragraph (2) if it were an organization described in Section 509(a)(3)

Not exactly Stieg Larsson is it? Anyway, if any portion of the code is still haunting your dreams and you feel as though it tops 509(a), you’re invited to exorcise it out now and your conscience will finally be clear.

David Foster Wallace and the Literary Tax Accountant [NYT]

Idaho Congressman Latest to Waste Everyone’s Time by Introducing a Bill That Would Terminate the Tax Code

Mike Simpson has represented Idaho’s 2nd Congressional District since 1999 and in that time he has cosponsored legislation that would abolish our beloved Internal Revenue Code. And even one time, in 2000, the House of Representatives managed to pass a bill that did exactly that by a vote of 229-187. It’s safe to say that, if similar legislation had been passed by the Senate and then followed up by the signature of the President, you would have heard about it. Since we haven’t heard any such news or seen any reports of this monumental legislative achievement, we can only assume that it has always been, and thus, always will be a failure and complete waste of everyone’s valuable time.

No matter! Congressman Simpson will press on for this all-important goal and making another run at ending the tyranny once and for all:

Idaho Congressman Mike Simpson is an original cosponsor of H.R. 462, the Tax Code Termination Act. This legislation would abolish the Internal Revenue Code and call on Congress to fundamentally reform the federal tax system.

“Over the last few years there have been several proposals to curtail the Internal Revenue Service’s (IRS) intrusion into the American homes. These include proposals to implement a flat tax or a national sales tax,” said Simpson. “I believe the most effective course of action is to sunset the current complex and unfair federal tax code and replace it with a simple and fair alternative.”

[via State Column]

Tax Return of the Day: Four Pounds of Unadulterated Joy

Warren Mayer of Coyote Blog posted this photo of his four pound tax return:


Don’t forget that the picture above is direct result of this:

Tax reform anyone? If you’ve got a tax return that weighs more, feel free to send us the pics (on the scale of course).

[h/t TaxProf]

The Department of Justice Is Not Impressed by Your Knowledge of the Internal Revenue Code

Or your perceived knowledge. One would assume that if you wrote a book titled Cracking the Code: The Fascinating Truth About Taxation In America, that you would be very familiar with this:
Tax Code.jpg
That’s the code. Four thousand some-odd pages of pure ecstasy.
Tax Update Blog tells us about Peter Hendrickson who is the author of Cracking the Code and his problems doing just that:
DOJ press release via TUB:

The 10-count indictment charged that for the calendar years 2000, 2002,2003, 2004, 2005 and 2006 Hendrickson filed IRS Form 1040 (income tax returns) and/or IRS Form 4852 (Substitute for Form W-2) stating under penalties of perjury that he had received no wages in those years. The indictment indicated that he had in fact received wages in those years in varying amounts. The evidence produced at trial established that Hendrickson had in fact received taxable wages and that his claims to the contrary were knowingly false. In reaching the verdicts, the jury rejected Hendrickson’s defense that he had a good faith belief that his statements regarding his lack of wages were true.

Followed by Joe Kristan’s thoughts:

The tax code is an awful mess, and Congress never passes up a chance to make it worse. That doesn’t mean there is a secret formula from the Illuminati that you can invoke to make it part for you like the Red Sea did for Moses.

Or that you can’t publish a book that probably cites said formula.
Time to Get a New Code-Cracker [Tax Update Blog]