Small Businesses Brace for Tax Battle - Not exactly news; but a good reminder that there will be more need for our services than ever; at least for those of us who are "unpatriotic" according to Joe Biden and believe in helping clients structure things to legally minimize their tax bites.
so what dose the word voluntary mean in the irs statements? im just trying to understand whats goin on i have done much research and found no law that states we haft to pay taxes please help
Chapter 6200 at 6210 states that... "It is the goal of the Internal Revenue Service to encourage and achieve the highest possible degree of voluntary compliance with the tax laws..."
Chapter 100 at 110 states that... "The primary mission of the Taxpayer Service is to promote voluntary compliance through education and assistance to taxpayers."
In Part VI, under Section 6810-Taxpayer Service, it is stated at (13) 31(1)(f) that... "returns are voluntarily submitted by taxpayers."
In Operating Techniques and Reporting Section 6810 at (13) 91(1)(a), the Manual states: "securing a valid voluntary income tax return from the taxpayer..."
In the Section on IRS Policy Statements at P-4-84, the Manual states: "The purpose of criminal tax investigations is to enforce the tax laws and to encourage voluntary compliance."
In the General Section, at 4022.65(3) it is said that... "When a person indicates he/she will voluntarily comply but requests that he/she be served..."
In the Automated Collection Function Procedures at 5535.4, the Manual states that the IRS may file returns under 6020(b) if the returns are... "not filed voluntarily.")
Furthermore, Webster's Dictionary defines the word voluntary to mean the following:
Voluntary: brought about by one's own free choice; given or done of one's own free will; freely chosen or undertaken; arising in the mind without external constraint; spontaneous; in law, (a) action done without compulsion or persuasion.
Don't fall into the trap of believing the idiotic argument that paying taxes is completely voluntary. This bogus claim has long been used by tax protestors, many of who are now in prison for following and encouraging others to use that very tactic.
The IRS language clearly intends for people to voluntarily file tax returns and pay their taxes. However, that is only half of the story. If some people do not voluntarily comply, IRS will do it for them and hit those people with severe penalties for noncompliance, including the seizure of all of their possessions and time in prison.
This is no different than how our society handles all crimes. We are all expected not to drive faster than posted speed limits, not kill other people, not steal things that don't belong to us, etc, etc. If we fail to volunteer not to do those things, there are police and a judicial system that will deal with us, with appropriate punishments.
Not filing tax returns and paying everything you owe is considered just as much of a crime as committing murder, and IRS will nail anyone who does not voluntarily comply with those rules. It is also a fact that accused murderers are allowed more personal rights and protections against improper accusations than are alleged tax cheaters in this country. IRS is not constrained by any of the constitutional limitations and protections that the police have to deal with. That may not be right, but it is the way things are.
I hope this clears things up for you. The IRS website has a lot of info on this and other similarly ridiculous tax protestor arguments. Check out Number 6 in this list of IRS's Dirty Dozen Tax Scams.6. Frivolous Arguments. Promoters have been known to make the following outlandish claims: the Sixteenth Amendment concerning congressional power to lay and collect income taxes was never ratified; wages are not income; filing a return and paying taxes are merely voluntary; and being required to file Form 1040 violates the Fifth Amendment right against self-incrimination or the Fourth Amendment right to privacy. Don’t believe these or other similar claims. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.
Gift tax exclusions
Subject: annual exclusion and lifetime exclusion
Dear Mr. Kerstetter,
I found and read you article on lifetime exclusions and annual exclusions dated September 2008. I enjoyed your satire and was wondering if there was a more recent version using the 2009 numbers.
I had a friend tell me his accountant told him his annual exclusions counted toward his lifetime exclusions and you article states otherwise. If you would, I would appreciate it greatly to know where to find the tax code referenced.
Thanks for the article.
That is very scary; that a professional tax advisor could be so off on such a basic principle of gift and estate taxation.
I updated my page on the Gift Tax to reflect the new $13,000 annual exemption. I also added links to download the IRS instructions for the 706 and 709, which should give you more detailed info.
Basically, if you look at the actual 709, you will see that it deals with "Taxable Gifts" when accounting for the lifetime exclusion and how much has already been used up. Annual gifts of under the exclusion amount are simply not classified as Taxable Gifts and thus do not affect the lifetime exclusion.
Before deciding on any gifting scenario, you need to work with a professional tax advisor who understands these concepts.
Yet another clueless corp owner
Hi – Very helpful information on the web. I have one quick question – if my company is a C Corp and has a loss can I deduct that on my 1040? Thanks!!
An S corp can possibly have its losses flow through to your 1040, but a C corp doesn't work that way.
Setting up a corp without understanding how it works was very foolish and dangerous. You need to get with a professional tax advisor ASAP to straighten things out before you do any more damage.
Its kind of you to respond but there is no need for that demeaning attitude.
I'm sorry if I offended you, but I assure you that it is for your own good.
I have long had a reputation for telling it like it is and not sugar-coating the truth. Anyone writing to me for advice can expect that kind of response.
In your situation, it is obvious that you, as do may other business owners, jumped into setting up a corporation all by yourself without consulting with knowledgeable professionals. The consequences of this reckless and irresponsible act can be very expensive as you most likely have already violated all kinds of tax and legal requirements.
For your own sake, you need to start working with a qualified tax pro ASAP before you get yourself into more trouble.
Pets as deductible dependents?
Actor Robert Davi has an interesting piece in the Washington Times, where he tries to make the case for allowing pets to be claimed on tax returns as dependents the same as children. While this would be great for those of us who have a lot of animal companions and no human kids, anyone can see that it hasn’t a snowball’s chance in hell of becoming reality.
The definition problems alone would make it impossible to control. If only dogs and cats are allowed to be claimed, the cries of discrimination from owners of other kinds of pets would be deafening. Critters such as birds, fish, snakes, horses, and sheep can all provide the same benefits as Mr. Davi describes.
Another big mess would be the need to assign Social Security or other identification numbers for each dependent animal. It was a reality that after IRS started requiring SSNs to be shown for dependents, the number of claimed dependents magically dropped dramatically; so that is a necessity.
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Telling the tax story...
Thanks to Jonah Goldberg at NRO for pointing out this effective video showing the increasing tax burden on the “evil rich” and how everyone making over $250,000 is expected to be patriotic and fork over even more of their money to Bozo Biden and his comrades in DC.
Accountants' Top Ten
David Letterman had his annual Tax Day Top Ten delivered by accountants last night.
Video from YouTube:
Top Ten Things I've Learned From Being An Accountant10. When you know the right people at the post office, it can be April 15 whenever you want (Phil DeFalco)
9. Wite-Out and 7-Up — surprisingly refreshing (Andrew Ross)
8. If you're confused by something on the tax form, just write "Huh?" (John Fodera)
7. You do the taxes; don't let the taxes do you (Richard Koenigsberg)
6. People will pay you a lot of money if you pretend to know how the tax code works (Adele Valenzuela)
5. The only thing more satisfying than getting a client a sizeable refund is the garlic shrimp scampi at Red Lobster (Doug Cohen)
4. Numbers is hard (Andrew Rubin)
3. After completing tax returns for 12 straight hours, your calculator starts talking to you (Sandra Bissell)
2. Always put your clients first... unless you get an offer to go on Letterman (Roger Levenson)
1. Women want me. Men want to be me. (Richard Cohen)
Obama Tax Returns
Drudge has a link to download the 43 page pdf copy of the Obamas' 2008 income tax returns, showing their AGI of almost $2.7 million.
Minor picky point: This tax return is for 2008, before they took over the White House. Yet, look at what they showed as their occupations for 2008:
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Tax season brings phishing and other scams – from cnet news.
Everyone Should Pay Income Taxes – It’s easier to justify higher and higher confiscatory taxation when the number of victims is smaller and smaller each year.
The Tax Capital of the World – New York and California are battling for this title. It’s no coincidence that the “evil rich” are thus more inclined to take steps to avoid being subjected to these states’ punitive taxation schemes.
Every Cent You Make
The 0bambi tax policy set to song courtesy of Rush Limbaugh.
We Still Need a Simpler Tax Code - The forever elusive and unattainable Holy Grail.
Another clueless S corp owner...
Subject: C Corporation and S Corporation question
S-Corporation. I did some research and I believe that I qualify as I am the only officer/member. My questions are:
1. Based on the researc0h I did, it seems that with a c-corp I can wait until November to file my taxes (no gains, only losses) which is the anniversary date. Is this correct?
2. If the s-corp falls into the same category as individual income tax, I assume that with an s-corp, the deadline to file the taxes is april 15th. Is this correct?
3. Assuming number 2 is correct, if I wait until after April 15th to convert my c-corp to an s-corp, do I still have to file the taxes by November or can I wait till the following year (January through april 15th) to file the taxes?
I am totally clueless with this and the IRS website is somewhat confusing. Please help me.
Thanks so much!
Have a beautiful evening!
You need to be working with a professional tax advisor before you do anything else because your research is obviously not working. Just from the items you mentioned, there are several misconceptions you have, and I'm sure you have dozens more that you didn't mention.
Here are just a couple of issues that you are confused about.
Tax Year - If you remain a C corp, its tax year can be set to end at the end of any month prior to the one year anniversary of the incorporation. There are many reasons for using a tax year other than December 31, as I mentioned on my website. The corp tax return (1120) or an extension (7004) is due to IRS by 2.5 months after the end of the tax year. Once you have filed your first 1120 and established the tax year for that corp, it is set in stone.
If you do successfully convert to an S corp, its tax year must go from January 1 through December 31 and its filing deadline will be the next March 15.
While there are some exceptions for filing the S election (2553) late, the normal deadline is by March 15 of the year in which you want it to take effect.
Before you take the step of electing to be an S corp, you most definitely need to work with an experienced professional tax advisor to see if that is a good idea and to make sure you understand completely how to operate your corp (C or S). You are guaranteed to get yourself into serious trouble if you continue to try to muddle through these things on your own, if you haven't already.
The Top Tools for Tax Season – I have not changed my opinion that do it yourself tax programs are dangerous for a lot of people because of their reliance on GIGO (garbage in, garbage out). However, I’m passing on this PC Magazine review of several of the consumer programs as a means of covering the other side of the argument.
Confused S Corp owner
Subject: Filling my s-corp and 1040 returns together
I found your email via an article you wrote on http://www.taxguru.org/corps/scorp.htm. If you don't mind I would like to ask you if it is possible for me to include the money I spent or invested in my s-corp on my 1040 taxes form that I will be filling from my regular employment. I have a regular job where I work 40 hours a week and I have my S-corp that I am investing in with my personal money from work. I am still working on my business and hence have not generated any revenue in my business.
Thanks, I appeciate your time and answers.
You need to be working with a professional tax advisor before you do anything else because you have very obviously gotten in over your head by setting up an S corp without having a clue as to how it works.
Just from the items you mentioned, there are several misconceptions you have, and I'm sure you have dozens more that you didn't mention.
Money you invest into the S corp isn't a deductible item. However, if there is a net operating loss inside the corp that can be passed through to your 1040, you may be able to have some offset to your W-2 income.
Before you go any further, you most definitely need to work with an experienced professional tax advisor to see that your S corp tax return is prepared properly and then that your 1040 is also prepared correctly. You are guaranteed to get yourself into serious trouble if you continue to try to muddle through these things on your own, if you haven't already.
At this late date, you should be filing an extension for your 2008 1040 in order to give yourself enough time to get things done properly.
Thank you for the advice. I will contact a tax advisor. It's for a website that I created and the only monies or funds that I have spent are $1000.00 and my monthly hosting account which is $10.00 per month.
Time For A Tax Reform – For obvious reasons, we will be seeing plenty of these kinds of articles over the next few weeks. In this one, Bruce Bartlett is calling for a massive overhaul of the tax code, similar to the one done in 1986.
Spend It in Vegas or Die Paying Taxes – The long awaited year of zero Estate (aka Death) Tax may not come true if a certain Marxist president has his way. As this article points out, that means much more money for those of us in the business of helping people legally avoid that kind of confiscation.
Multi-State Taxes Are Not DIY
Subject: NY & MN
HI THERE GURU MAN,
I DON'T WANT TO BOTHER YOU, BUT YOU MAY HAVE AN IDEA OF WHOM I CAN ASK
(I TRIED TAXCUT/H&R BLOCK WITH MY SOFTWARE, BUT THEY SAID MY KEYCODE IS INELIGIBLE)
I am doing taxes for a friend who is a full-time resident of Minnesota, but has a New York w-2.
She has $1498 of NY state taxes withheld.
I listed her as a non-resident of NY and full-time resident of Minnesota in the personal information in the software.
Now how do I go about preparing the state taxes? Do I need to buy and download New York software?
Then what will I do next (so that it does not just show that she owes $1184 to Minnesota?)
I DON'T KNOW WHO ELSE TO ASK???
HOW IS TAX SEASON GOING FOR YOU?
Multi-state tax returns are very tricky and most professional level tax programs have a hard time doing it properly. It wasn't until just a few years ago that the Lacerte software, which I use, was improved enough to do the multi-state returns almost automatically. Even so, I still often have to do some manual tweaking to get everything right.
The consumer DIY programs are not designed for anything that complicated and odds are that errors will slip through, resulting in a lot of hassles with both state tax agencies.
My point is that this is case for a professional tax preparer who is experienced with multi-state tax returns and not a task that you should be trying to handle on your own.
Aren't you just the sweetest man alive!!!
Thank you for writing back to me.
When taxes are finished, we ride our bikes!
Another 0bambi cabinet member?
A crack smoking tax cheating mayor has to be high on the list of appointees.
Up in smoke...
Nicotine addicts are looking at higher taxes to support their habit.
From Jay Leno via NewsMax:
Obama also said if you buy a new car, you will able to deduct the sales tax from your income tax. Or you can just take a job at the White House and you wouldn’t have to pay taxes at all.