Tax Lawyer's Blog

“President Merkin Muffley: I will not go down in history as the greatest mass-murderer since Adolf Hitler.

General “Buck” Turgidson: Perhaps it might be better, Mr. President, if you were more concerned with the American People than with your image in the history books.”

After a few months hiatus, the tax quack is back with his favorite tax blog posts of the last several months.

Let’s dive right in, shall we?

Joe Kristan, Tax Updates Blog

This time we have 2 posts from Mr. Kristan:

The One Number On a Return That You Really Don’t Want to Get Wrong - a taxpayer filed a police report alleging that his tax refund was stolen. It turned out that H&R Block, the preparer, had input the wrong bank account number on the taxpayer’s electronically filed tax return.

Here’s Joe:

Service Center Advice 199-017 . . . says that if the return is correct, but the bank mistakenly credits the wrong account, the bank has to make it up to their customer. This implies that the person who makes the goof is on the hook. If they follow that logic in the Des Moines case, the preparer would have to make up the refund and go after the person who got the incorrect refund to get reimbursed. Good luck with that.

Five Years in Jail for Well-Uniformed Alasksan Dentist – A dentist claimed purchases at Dress Barn, David’s Big and Tall Store, and Big Dog Sportswear as “uniforms” for the dental practice. Additionally, he claimed “advertising” expenses to companies called Latin Magic, Introductions, Our Best Friends and Friend Finder and claimed “continuing education” expenses to massage parlors.

Joe says,

The 61 year-old would have looked funny filling cavities while wearing a uniform from Dress Barn; maybe that’s why the IRS thought that the expenses weren’t really for uniforms. A jury apparently was also dubious, and Mr. Lockwood was convicted of four tax evasion counts.

He was tried and found guilty of criminal tax evasion and sentenced to 5 years in prison.

That’s much worse than root canal.

Robert Flach, The Wandering Tax Pro

The EIC and Tax Fraud - a nice post on taxpayer and tax preparer abuse of the Earned Income Tax Credit:

 [T]he IRS estimates that between $10 billion and $12 billion in erroneous EITC payments were made in Tax Year 2006

My Observations: The EITC is a refundable credit. In other words, qualifying taxpayers get a check from the government regardless of whether they paid any taxes in during the year. 

It is, therefore, a welfare program and, as was the case with America’s old welfare system (subsequently reformed in the 90’s through a joint effort of Congressional Republicans and President Clinton), its entitlement nature invites abuse.

Nobody should get money from the government (i.e. other taxpayers) merely by completing a form requesting the money.

Like the guy who leaves his keys in his Cadillac and the driver-side door wide open, a government that makes it this easy for people to steal from it deserves to have it’s money stolen.

Bruce, The Tax Guy

What to Do If You are Missing a W-2 - Good advice here for the all too common problem of lost, never sent or missing forms W-2:

You still must file your tax return on time even if you do not receive your Form W-2. If you have not received your Form W-2 by February 17th, and have completed steps 1 and 2 above, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible.  There may be a delay in any refund due while the information is verified.

Note to Delinquent Taxpayers: If you don’t have your old forms W-2 and/or forms 1099, you can request a Record of Earnings from the IRS that shows all employee and non-employee compensation payments made to you during the tax year.

Kelly Phillips-Erb, The Tax Girl

Ask the Tax Girl: Mortgage Forgiveness - Another excellent post in the “Ask the Tax Girl” series:

Here’s the question:

I have a 1099-c from a short sale on my house, I was hoping to be granted an exemption because of the Mortgage Forgiveness act of 2007. My amount in box 2 is $54,809 and the amount in box 7 is 0.00. Not sure what all this means.

And part of Tax Girl’s answer:

A form 1099-C is a form issued by a lender when a debt is forgiven. For forms 1099-C related to the forgiveness of debt related to real estate, the amount of debt forgiven is listed in box 2 (that’s the $54,809 you mentioned) and the value listed for your home is listed in box 7.

Normally, the forgiveness of debt results in income which is reportable and taxable on your federal income tax return. However, as you noted, the Mortgage Forgiveness Debt Relief Act of 2007 (MFDRA) allows an exclusion up to $2 million (or $1 million MFS) of debt forgiven on your principal residence for qualified taxpayers. This applies to tax years 2007 to 2012.

Caveat: Read Kelly’s entire post and her disclaimer before you file your return.

Kay Bell, Don’t Mess With Taxes

Happy Birthday Abraham Lincoln, Father of the U.S. Tax Code - Kay Bell reminds us that Abe Lincoln , as great a man as he was, was not perfect:

And while our 16th president achieved many noteworthy things during his time in the White House, his contribution to our tax system is usually overlooked. 

OK, he didn’t actually write the tax code. But he saw the need for an income tax and signed the legislation into law to help finance the Civil War.

My Favorite Lincoln Quote: In response to a political opponent’s charge that Honest Abe was two-faced:

If I had two faces, why would I choose this one?

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