Tax Guru – Ker$tetter Letter

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Archive for November, 2004

Responding To Tax Protestors

Posted by taxguru on November 30, 2004

Over the past 25 plus years, I have studied, analyzed and debunked literally hundreds of tax protestors and their ridiculous arguments for why nobody has to pay taxes in this country. For a long time, I felt as if I was doing the IRS’s job because their strategy was to just ignore the idiots and hope they would just go away. As I constantly explained, the IRS’s silence on these matters just lent perceived credibility to their insane arguments. As I’ve been chronicling, IRS has finally taken a more proactive approach to dealing with tax protestor scammers.

I am still waiting to hear back from Kenny Lizotte as to the IRS book that officially says that nobody has to pay taxes. He was so positive about that in his drunken messages on our answering machine. Of course, no such book exists; so we will never learn that secret from him. He has resorted to a long running tactic used by people in the tax protestor movement; trying to indict us professional tax practitioners as active participants in the massive taxation conspiracy in this country. The list of questions he sent was tiny compared to the ones I have seen in the past, which were often three pages long, single-spaced.

I have no intention of wasting time responding to idiots like Mr. Lizotte. However, I was copied on the following email that a reader sent to Mr. Lizotte. I haven’t checked all of the code section citations; but they sound reasonable. However, the name of the sender does seem a bit strange.


From: “D Shyster” shyster1040@hotmail.com

To: kennylizotte@msn.com

Subject: Re: Tax Questions

Kenny:

In reference to your questions to Kerry Kerstetter (posted on http://www.taxguru.net)/ of November 28, 2004, try this on for size:

Section 1 imposes a tax on your “taxable income” which, under Section 63, is the “gross income” under Section 61 less the deductions allowed; thus there is a tax imposed based on your “taxable income”

Section 6012 requires you to file a tax return if you had gross income in an amount greater than the sum of the basic standard deduction and the exemption amount – probably about $10,000 right now, give or take; thus, if you earned more than $10,000 (or whatever the basic standard deduction and the exemption amount add up to), you have to file a tax return, and that return must show the tax calculated under Section 1.

Section 6151 requires you to pay the tax shown on a return if you were required to file that return.

Therefore, the following results: If you had gross income above $10,000 (or whatever the current basic standard deduction plus the exemption amount is) then you must file a tax return showing the tax calculated under section 1; because you have to file a tax return, you must pay the tax shown on that return.

I believe that the foregoing shows:

(1) what code section requires average Americans to pay the income tax – Section 6151 does;

(2) what code section shows the liability of the average American for the income tax – same as before, Section 6151 obligates you to pay the tax shown on your return;

(3) What code section requires Americans to keep books and records – Section 6001 permits the IRS to issue regulations requiring anyone liable for any tax to keep records – which they’ve done – see Treasury Regulations 1.6001-1 and following (and which will apply to you if you meet the test under Section 6151 because then you’ll owe taxes, which means you’ll be liable for them);

(4) What code section requires Americans to make a return – Section 6012 does; and

(5) What code section requires the average American to submit to withholding – short answer – Sections 3401 to 3406 do. Long answer – nothing directly; however, Section 6654 does require you to make estimated tax payments on a quarterly basis (i.e., every three months) prior to the date for filing your return – i.e., it’s a pay-as-you-go system, and Section 3401 and following requires your employer to withhold from your wages amounts that approximate the taxes you’ll ultimately owe on that income, and also gives your employer complete protection from you if you try to sue the employer to get them back. So, the effective answer really is – Sections 3401-3406 do.

Does that do it?

BTW, yes, every little red cent you got for doing work, e.g., wages, or for lending out your money, is included in the term “gross income” – section 861 does not “determine” anything, not your taxable income from sources within the US, nor even whether or not a given activity was a “source” of income – all that 861 does is assign a geographic location to your sources of income – it tells you whether or not a source was in the US or outside the US, it does not tell you whether or not the activity was a source at all. Further, the 16th Amendment was properly ratified and it is therefore part of the Constitution. Even further, Congress has almost unfettered power to tax things – the taxing power is included in the general list of Congress’ powers and is therefore of equal dignity with all the rest. That means that it is an independent source of power, and is not limited by the other sources – meaning that Congress can tax purely intrastate income even though it cannot regulate purely intrastate activity that generates that income.

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Posted by taxguru on November 30, 2004

Tax writers Want GAO Review of OICs

 

Former Treasury Officials Slam National Retail Sales Tax, Praise VAT – Great idea.  Let’s emulate the Europeans because we all know that they have all the answers for designing a perfect society.  How stupid an idea is that?  Let’s add an entirely new taxation system to learn and keep track of, rather than just use one we are all already familiar with, such as sales tax.

 

IRS Officials Urge Care for Those Making a Car Donation; New Law Changes Rules at End of the Year

 

Hartford Goes to Court in Effort to Block EITC Test – There’s just something satisfying about local governments having to battle with IRS just as we peons have to every day.

 

IRS Simplifies FUTA Tax Deposit Rules for Small Businesses  – Not a huge break, but we need to be grateful for whatever tiny reduction in red tape we are given by our masters.    

 

ABA Tax Section Asks Congress to Repeal or Modify AMT – This pretty much sums it up:

…alternative minimum tax no longer serves the purpose for which it was originally intended and asked that it be repealed or modified to be more in line with its original purpose of applying to high-income taxpayers.

Let’s not forget to support ReformAMT

 

Time to save Social Security

 

 

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Posted by taxguru on November 30, 2004

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Posted by taxguru on November 30, 2004

Tax activist faces charges – More on Joe Banister.

Pursue Happiness, Vote GOP. The real reason Republicans win. – Good summary of the DemonRat philosophy, including:

  • That taxes must always be higher, never lower, because in the words of one traditional Democrat “I want the government to have the money.”
  • That you should not be allowed to invest some of your Social Security taxes in a personally owned account that will grow over your lifetime and give you some asset ownership upon your retirement, because it is a bad thing for you to have such assets.

On Social Security, Bush tested. Reform allies want him engaged.

New Social Security Plan Allows Workers To Put Portion Of Earnings On Favorite Team – From The Onion

The IRS Chain Gang – Similar to the “Tax Freedom Day” concept. We spend a large portion of our time working just in order to feed the government coffers.

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Posted by taxguru on November 30, 2004

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Minimum Mileage For Section 179

Posted by taxguru on November 30, 2004

Q:

Miss Kerstetter,

Let me start off by asking if you provide accounting services?  I am based in Hot Springs.

I found your information on the recent changes to section 179 in relation to vehicle purchases very helpful.  I would like to ask if you could provide additional information about vehicle purchases under section 179.  I understand that the deduction is limited to $25,000 after October 22 2004 and that the vehicle should be used more than 50% for business.

I am considering purchasing a business truck for trips to UPS, the bank and post office.  More than 50% of the mileage will be for business usage however I expect to put 5K or less miles per year on the vehicle. 
With it being December already I may not put more than 500 miles on the vehicle.  In order to get the best price I may purchase the vehicle from a dealer several hundred miles away.

This raises two questions

1. Is there any minimum mileage required for section 179?

2  Can mileage between the dealership and home office when picking up the vehicle be counted as business mileage?

Thank you in advance for your advice!

A:

There are no minimum number of miles required by IRS to qualify for the Sec. 179 deduction.  There just have to be some miles driven, which need to be allocated on a percentage basis between business and personal.

If the vehicle will be used more than 50% for business in the future, I would consider the trip to pick it up and drive it home to be a business trip.

The $25,000 limit is only for SUVs and is not for trucks.  You can see a lot more info on my website at:
http://www.taxguru.org/incometax/Rates/Sec179.htm

I hope this helps.

Kerry Kerstetter

I am not currently accepting any new CPA clients; but everyone is welcome to check out my latest news & commentaries at: www.TaxGuru.net and the reference materials at www.TaxGuru.org 

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Posted by taxguru on November 30, 2004

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Rollover of Gains From Sales of Qualified Small Business Stock

Posted by taxguru on November 30, 2004

Q:

I have found your website very helpful.  I had a quick question regarding the sale of QSBS.  I was wondering if it is possible to roll over the proceeds into a another small business shell that I have created?  Would that be legal?  I have not found any documentation stating that this is not possible.

Thank You,

A:

What you are referring to is an IRC Section 1045 rollover of gain, which requires that you reinvest the proceeds of the stock sale into new qualified small business stock within 60 days.

The key thing is that you need to actually purchase the stock from someone else.  You can’t just use the money to set up a new company.  You can’t buy the stock from yourself, unless you want to show that sale as a taxable event.

To follow the chain of events, somebody else will need to report the sale of his/her stock to you in order to make this a legitimate deal.  That person will then have the ability to do a Sec. 1045 rollover, and so on.

I’m sorry to burst your bubble here.

Good luck.

Kerry Kerstetter

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Posted by taxguru on November 28, 2004

 

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Dealing with tax protestors

Posted by taxguru on November 28, 2004

I actually received an email this morning from the retarded tax protestor who had been leaving obscene late night messages on our answering machine.  His name is Kenny Lizotte and his email address is kennylizotte@msn.com  I’m sure he would love to hear from anyone wanting to discuss his take on taxation.  I don’t know what part of the country he is in because he had his phone number blocked from the caller ID.

He sent me this standard crap that tax protestors have long used to try to distort the issues of legitimacy in regard to taxation:

Subject: Incometax

What code section requires the average American to pay the income tax?

What code section shows the liability of the average American for the income tax?
What code section requires Americans to keep books and records?
What code section requires Americans to make a return?
What code section requires the average American to submit to withholding?
Please just direct answers?
 
My reply:
 
Kenny:

That’s not how things work in this country.  I am an independent CPA and don’t work for the government; so I have no obligation to waste my time trying to educate you on the tax laws.

It is you who have the burden of proving your case that hundreds of millions of people in this country are wrong and you are one of the few geniuses who have the true answers about taxes. 

You left a number of late night drunken messages on our answering machine (your name showed on our caller ID) in which you called me obscene names and claimed that you obtained directly from IRS a book that states that nobody has to pay any taxes.  If that is true, tell me the name or publication number of that book, along with the page number where you found this statement, and I will check it out.  If what you are saying is true, I will write about it. 

However, if you are not able to back up your claims, please stop wasting my time.

Kerry Kerstetter

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