Bad tax advice comes with a price – Thanks to Andrew Roth for this reminder that there are a lot of scam artists among the tax practitioner community.

 Charities used as tax dodges, IRS chief says

It is actually important to show the proper occupation in the signature section of your 1040. IRS screeners do review the income and expenses shown on the return for reasonableness in relation to the reported profession.

In regard to the current H&R Block ad campaign claiming that their review of tax returns that were prepared by others yields an average of $1,500 in “found money,” I wasn’t personally offended in the least by this.  I assumed it was referring more to people who prepare their own returns. 

Well, I guess a lot of other CPAs thought the ads were referring to their professional expertise, so the AICPA has gone on the attack against Block for this ad campaign, even filing a complaint with the FTC because an ad refers to a mistake made by a CPA. 

I guess the AICPA wants to preserve the myth that we CPAs are not human and never make mistakes.  As has been obvious, I have never been a believer that Block is the most effective at finding ways to maximize the tax savings for their customers.  However, making a federal case out of their attempts to drum up business seems like quite an over-reaction.

Thanks to reader George Storey for passing this along. 

Supreme Court: Creditors Can’t Seize IRAs – An interesting case involving some people from our neck of the woods.  Just as Florida’s extremely generous protection of residence equity is popular with OJ Simpson and others who want to avoid paying on legal judgments, this new ruling gives similar protection for IRA accounts.  This should be a good for the IRA business.  It will be interesting to see how they use this case in their ads and promotions.

Do Taxes Thwart Growth? Prove It – Thanks to Ohio CPA Dana Stahl for the heads-up to this idiocy from the DemonRats’ official newspaper.  I don’t read the Times, so I may have missed their story about freedom not being for everybody if that Dem. anti-Bush line has already been expounded on by our elite betters. 

Q:

One of your responses to a guy about incorporating included the observation that a minimum tax is due from corporations.

My accountant is unfamiliar with such a Federal requirement.   Were you referring to a State statute?   Or is he in need of enlightenment?

A:

The $800 annual minimum tax to which I was referring is levied by the State of California on any corporation chartered in that state or chartered in other states, but operating inside the California borders.  It means that even if a corp has no net profit, or even a huge operating loss, there is still a tax of $800 due to the rulers of the PRC.

Luckily, there is no similar thing with Federal corporate taxes.  Those are based on net taxable income.  If there is a loss or a break-even, there is no Federal tax due.

On a related issue, this is as good a time as any to once again remind people of how important it is to always file corporate income tax returns, even if there is a loss or no activity.  Sending IRS the 1120 showing the actual financial results for the year is a prudent self defense measure that will prevent IRS from accusing the corp of evading taxes on millions of dollars of income several years after the fact.  I have seen this happen on several occasions to people who didn’t feel it was necessary to file 1120s when there was no tax due.  That assumption turned into some very expensive messes when IRS came after non-filing corporations.

I hope this helps you and your accountant understand this aspect of corporate taxes.

Kerry Kerstetter

 

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