TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

Pres. Obama has been pushing for changes to the Internal Revenue Code that would limit the tax benefits of pass-through entities. Most small businesses are limited liability companies or S corporations and the profits and losses pass-through to the individual members or shareholders. These are merely preliminary proposals and most likely the House of Representatives will not let these proposals be pushed through Congress. There is been a lot of recent talk about the lack of small business loans and it is been pointed out that the Small Business Administration is a good source for guaranteed business loans for the smallest of businesses. That is simply not true! Since 2005, the average size of the Small Business Administration loan under its loan guarantee program has gone from approximately $160,000 to approximately $342,000. In 2005, the government backed loans totaled almost 96,000. Last year, only 44,000 loans were guaranteed. Also, the smaller banks, that are many times the best...

The head of the exempt organizations operation of the IRS has invoked her Fifth Amendment privilege not to testify before Congress. After giving a several minutes statement saying she was " not guilty of violating IRS rules and regulations .", Lois Lerner then declared her Fifth Amendment privilege. She is now been placed on leave , and actually replaced in the IRS. This just highlights an ongoing problem with exempt organization reviews by the IRS. There are no time limits requiring the IRS to start or complete a review of an application by an organization seeking to become a charitable organization for federal tax purposes. Also, there are no limitations on the questions that can be asked, nor the documents required. That Pres. Obama has use the IRS as a tool for his reelection campaign (joining former presidents Franklin Roosevelt, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, and Bill Clinton) is not surprising. The lesson from this is clear. Congress must e...

President Obama now joins former Pres. Franklin Roosevelt , Kennedy, Johnson, Nixon and Clinton in using the IRS to hammer his political opponents. Treasury officials knew of the attack by the IRS against Tea Party Conservatives in June, 2012 in the middle of Pres. Obama's re-election campaign. The Treasury Inspector General, who is supposed to protect taxpayers from IRS abuse, knew all about TaxScam and did nothing. Congress is screaming, and President Obama fired the Temporary IRS Director (who was leaving in 3 weeks anyway.) Other than that, nothing changed at the IRS. This simply confirms that the IRS is a political arm of the government, not an objective and neutral agency to fairly administer tax law. Tax law is not fair and the administration of the law is tilted. Maybe, we need to start over?

IRS Non-Apology Over Harassing Tea Party Non-Profits Jon Stewart, on the Daily Show pegged Pres. Obama and the IRS for what they really are: "You've managed to show that when the government wants to do good things, your managerial competence falls somewhere between David Brent and a cat chasing a laser pointer," Stewart said. "But when government wants to flex  its more malevolent muscles, you're f—ing Iron Man."  The IRS is totally under the control of the politicians and bureaucrats and is being used as a political attack machine. Pres. Obama follows a long line of Executive Branch abuse of the IRS. President Clinton had his IRS hit list, President Nixon had a similar list. Now, the Obama Administration has upped the ante by attacking Tea Party Non-profits to stymie the opposition. Who knows what other dirty tricks lies in the halls of the IRS at the hands of which politicians. It is time to clean house. If Congress would do its job and reform the ...

  Drone Attack In its continuing quest to collect more taxes, the IRS is targeting small business. For the past several years, individuals instead of being audited by a live human being, are being audited by computer and unresponsive mail audits. In order to get more money, the IRS is expanding this secret surveillance to audit small businesses. By using the Robo audits, the IRS can attack more small businesses, and attempt to collect more money. The way this works is the IRS uses many of its matching computer information documents. For example, if you are retaurant and tips are put on credit card receipts, the IRS will track those tips, determine an average percentage and apply that as additional wages to your employees. This way they can collect more taxes from the employer in the form of 941 employment taxes, and they can also go after the employee to collect more income tax. The problem with these audits is that there is no educated human being to speak to concerning t...

Congress, after failing in its duty to revise the Internal Revenue Code   for decades, has launched a tax reform website.  Is this a real attempt at soliciting ideas about tax reform, or just a new twist on getting an email list? To show they are really connected with social media, there is a new Twitter  feed. Let's see how they address the following: 1. Estate Tax Reform 2. Limiting Taxation on US citizens (including businesses) to US Source Income rather than Worldwide Income 3. Address the Earned Income Tax Credit and other refundable tax credits. 4. Adjust capital goods for inflation to eliminate tax on inflation rather than real growth. 5. Honest Tax Simplification. Ron Cappuccio www.TaxEsq.com

A lifetime trust, also known as a living trust, can be the difference between people controlling their estate and being subject to the expense, confusion, and problems that sometimes affect unplanned estates. Nevertheless, a whole industry has grown around overselling living trusts when they are not really needed. Now, AARP and Kiplinger have gone in the other direction proclaiming that trusts are expensive and not needed. In the June 2013 Personal Finance issue, the newsletter gives really bad advice to avoid trusts. Frequently, as a tax attorney, I get a call from clients saying "what can we do with Mom's assets? She has dementia, and is being influenced by an acquaintance or family member to give them chunks of money." Unfortunately, it is too late. Unless the family wants to go to court with an expensive and embarrassing lawsuit to prove that their mom is incompetent, there is not much that can be done. If, however, when the signs of problems first started appea...

Bitcoin transactions are Taxable Bitcoin has become the rage in the past few months by the so-called asset protection industry. There have been claims that this cryptocurrency cannot be detected by governments and transactions are not taxable. Not true!   Under the Internal Revenue Code, gross income means all income from whatever source. Trading Bitcoin currency for services or goods is clearly income for US Tax purposes. There is no argument. Just like bartering transactions, the question becomes "what is the value of the Bitcoin transferred?"  With Bitcoin, the answer is online . If you want to transact business in Bitcoin that is your option. But, the transactions must be included in gross income or you will be committing tax fraud that can be easily proved by the government. Anyone interested in tax planning and asset protection can get real results by consulting their tax lawyer. Ron Cappuccio www.TaxEsq.com

Lauryn Hill has learned that being a rock star, although it exempts you from many of the burdens of life, does not exempt you from filing taxes. Just like famous actor (Wesley Snipes) and hotel heiress (Leona Helmsley), Lauryn Hill has felt the full wrath of the US Government by being thrown into jail for failing to file tax returns. It seems, Miss Hill, through her bevy of tax and financial advisers, did not file tax returns for 2005, 2006 and 2007. Three years; that's the magic number for the IRS to have a presumption of "willful" failure to file. Even though she had big tax losses in 2008 and 2009, her late filing and late paying of tax means she is going to Federal Prison for 3 months. Let's look at the facts: Failure to File - 2005, 2006, 2007 LATE Payment - $1mil in taxes (note she actually paid the taxes, just late) Tax Loss - 2008, 2009 when she lost popularity. So let's see what really happened here. The US government probably sp...

Nexus - When are you "Doing Business" in a State or Country? Google is one of the biggest collection of companies in the world. Wisely, Google has divided itself into many companies to deal with the different tax laws not only in the 50 States of the United States but in dealing with worldwide taxes. By using proper tax planning, Google is effectively avoiding taxes in many countries. In order to be subject to taxation in a given country, a business must have "nexus" in that country. The word Nexus comes from the same root as "connection". Typically that means a company must have an actual physical presence in the country. Google has been very wise in its tax planning. It has its main business in Bermuda, a low tax country, and in the Republic of Ireland, also a low tax country. Google has set up a separate entity in the United Kingdom as a "technology and marketing" company. The idea is that technical services are performed by the UK su...