IRS Response To Tax Protestors

IRS has updated their response to many of the bogus arguments used by tax protestors. You can even download a more detailed 36 page pdf document covering these points. It pretty well speaks for itself and is consistent with what I have been saying forever, that the arguments are complete garbage and anyone who tries to use them to avoid filing tax returns will get a well deserved stay in the Fed’s gray bar hotel.

KMK

With friends like him…

1099 Discrepancies

A common situation when setting up a new corporation is discrepancies with 1099s by customers. They are required to be submitted to IRS for unincorporated payees, but no 1099 reporting is required for payments to corporations. What often happens is a customer includes payments that were made to one’s corporation or deposited into the corp’s bank account under the person’s unincorporated ID number. While it would be best to have them correct the 1099, that isn’t always possible and in fact is not even a big deal.

Some people think this means they have to pay the much higher personal and self employment taxes on this erroneously reported income. Not true. As I mentioned earlier, the amount of income you pay tax on is not dependent on the 1099s. I have had this situation hundreds of times with clients and have worked out a simple way to avoid any IRS problems. To avoid a nasty-gram from IRS when they match up 1099s with 1040s, it’s essential to report gross receipts at least as high as the amounts reported as income to you personally on 1099s. Then, in either the Cost of Goods Sold or Other Expenses section of the Schedule C, include an entry for “Income Deposited Into Corporate Account and Reported On Its 1120” to back out that income and avoid double taxation of it. I usually include another attached statement explaining about the newly formed corporation (giving its FEIN) and how erroneous 1099s are being handled. IRS has never had a problem with my reporting these in this manner.

As I have mentioned on several occasions, this kind of additional self defense info is one of the reasons I refuse to accept electronic filing of income tax returns. There is no place to explain such discrepancies in that format.

KMK

Enron Tax Tricks

Maybe it’s because I have long made a good living helping people win the tax game; but I can’t share the disgust over the fact that Enron had a large staff with the sole purpose of structuring things to minimize taxes. My disgust is with the rulers in DC who force companies to devote so much manpower to such tasks with their idiotic and outright punitive tax laws and regulations. I can still remember many of my college classes, where we were taught that the main function of a corporation’s management is to maximize the return (aka profit) for the shareholders. Minimizing taxes is just as important in that equation as reducing other overhead costs, such as labor and rents.

KMK

Economists For Sale

It’s long been common knowledge that opinions of economists can be purchased in exactly the same way as murder defendants buy the “expert testimony” of psychologists. The fact that a bunch of left wing economists don’t want people to be able to keep any of their own money is nothing new and no big deal.

KMK

Libertarians have more fun–and make more sense

Let It Snow

The new Treasury Secretary seems to be on the right track in support of lower taxes.

In his own words

Larry Kudlow’s take

Davis recall is gaining traction

Wishful thinking. The GOP in the PRC ran such an incompetent campaign for governor last year, what makes them think they can do any better in a recall election against Gray-Out Doofus?