Arizona Tax Preparers Get 5 Years in Prison

Deane Young and his wife Shelia Young of Overgard, Arizona, were convicted of tax fraud arising from their preparation of tax returns that claimed millions in bogus tax refunds.  The returns claimed refunds of $12,000 to more than $368,000.

Income Tax Law Complicates Donations to Hotshot Families

Arizona Republic:  “Tax concerns could force the families of the 19 hotshots killed in the Yarnell Hill Fire to wait until next year to receive their share of $4.7million in donations collected in the wake of the tragedy.  Officials with two firefighters associations in Phoenix and Prescott, which have collected more in donations than any other groups, said Friday that they are worried the families could receive the cash only to be hit with a giant tax bill.”

Will More People Denouce Their US Citizenship If Taxes Are Raised?

New York Times:  “On April 30, the Treasury Department announced that 461 Americans had renounced their citizenship in the first quarter of 2012. A 1996 law requires that every person doing so be named, with their names published in the Federal Register. The idea is to shame those who may be renouncing their citizenship solely to escape taxation.

The extreme step of renouncing one’s citizenship is necessary to escape taxation by the United States, because the United States, alone among the major nations of the world, taxes its citizens wherever on earth they live.

Other countries tax only those who live and work within their borders; if their citizens live and work in another country, they are liable only for taxes incurred in that country.

Americans living abroad, however, must not only pay taxes in the country in which they are living, but United States taxes as well, although there is an exemption of $93,000 that is adjusted for inflation annually. The only legal way for American citizens to avoid American taxes is to renounce their citizenship and live their lives permanently in another country.”

Tax Traps To Avoid For Doctors And Businesses

Physcians Practice:  “The next 60 days marks the final push to sell physicians across the United States tax plans of both good and questionable value. Promoters of various plans are well aware of the pressures affecting your income and will make a variety of frivolous arguments that appeal to your desire to save.  As always a great CPA is your first line of defense against both tax exposure itself and the risk of committing tax fraud through an overreaching plan, but there are a number of common markers that are easy to spot.

The IRS creates an annual list of the “Dirty Dozen” tax schemes; here’s a breakdown of the top ones that affect or target doctors. Remember that the higher your income, the more likely you are to face an audit and substantial civil and criminal penalties that I guarantee will exceed any short-term savings gleaned from any bad planning.”

The Buffett Tax Loss

The Wall St. Journal:  “The case for the Buffett tax keeps eroding. When President Obama announced the idea, he said it would help ‘stabilize our debt and deficits over the next decade.’ Then came the inconvenient revelation that the new 30% millionaire’s tax would raise only $46.7 billion over 10 years, and would leave about 99.5% of the deficit intact in 2013. It was a far cry from ‘stabilizing the debt.’  Now we learn that the Buffett tax the Senate is expected to vote on early next week will make the deficit worse. That’s because both Mr. Obama and Senate Democrats have made it clear that their new ‘fairness’ tax is to offset the revenue loss from another provision related to the Alternative Minimum Tax.

Busting Myths About Rich People’s Taxes

Martin A. Sullivan’s article “Busting Myths About Rich People’s Taxes” published in Tax Analysts on April 16, 2012, is a must read.  It dispels many commonly held myths about the rich and federal taxes.  Here are some statements from the article:

There are good reasons for the government to keep its hand out of the pockets of the wealthy. For example — and this will be a shocker to most liberals out there — it is a basic tenet of tax economics that an efficient system should eliminate all taxes on capital income. . . . That type of thinking recently led Kevin Hassett of the American Enterprise Institute to call the Buffett rule ‘‘the stupid rule.’’ ‘‘It’s basically just a back-door way to hike taxes on capital,’’ . . . To maximize growth, economists would set the tax rate on capital gains, dividends, interest, and all business profits at zero. . . .

Myth #1: The Buffett rule is largely a symbolic political ploy because it would raise only $5 billion a year. . . .

Myth #2: The United States cannot raise taxes on the wealthy because ‘‘there appear to be limits in the real world as to how much tax blood can be extracted from rich turnips’’ and ‘‘the U.S. has the world’s most progressive tax burden.’’

Myth #3: The United States has a progressive income tax.