Thursday, June 28, 2007

Arnold v. Commissioner -- A Strong Case for Regulation of Unlicensed Tax Return Preparers

I have been regularly reading Tax Court Decisions, in preparation of taking the Tax Court exam for admission of non-attorneys. It is considered one of (if not the) most difficult tests in the field of taxation. Yesterday, the U.S. Tax Court released TC Memorandum 2007-168 Arnold V. Commissioner. This case involves a tax accountant husband and a realtor wife who each operated separate S-Corporations for which neither paid themselves W-2 wages, each corporation deducted a myriad of expenses for which no substantiation existed, and to top all of that on their 2002 and 2003 income tax returns claimed Earned Income Credits of $352,854 and $489,827 (the earned income credit is a welfare vehicle to provide an income supplement to low income Americans that has a maximum allowable credit of around $5,000)

The most interesting move the court and the IRS made in regards to this case is treatment of owner compensation. S-Corporation officer-shareholders are required to be paid as employees however in this case the IRS and the Tax Court determined that the Arnolds were each subcontractors of their separate S-Corporations liable to SE tax rather than back FICA tax. The decision is unclear if they had appointed employees as officers, but generally this issue is one where the IRS will reclassify distributions as wages an add on much heavier employer quarterly penalties.

The most unbelievable part of this case is the amounts claimed EIC for 2002 and '03 of a third of a million and a half million dollars respectively. One of the first things any tax preparation class will teach you is the earned income credit is only worth five thousand dollars, and only if your income is in a narrow range is the EIC worth even that amount. For anyone to claim as much EIC as Mr. Arnold claimed is laughable, but for a man who others come to for their tax advise to commit such a brazen act of fraud is alarming. If this man were licensed I am sure his license will soon be (if not already) revoked. However, unless this man is enjoined by a court and without legislation, he can still prepare tax returns without a license (after his jail time, I assume he will do time)

Congress has been debating, and last I heard, is expecting to pass a requirement for all individuals engaged in the practice of tax return preparation to pass a written examination and be subject to the same ethical and continuing education requirements in tax practice to which CPA's, attorneys, and enrolled agents are obligated. This is a strong step in adding oversight to a sector whose conduct has blackened the reputation of a needed and valuable industry. I hope Congress broadens licensing to all tax preparers so that anyone practicing tax at least has to meet a minimal competency requirement, and the IRS will have greater strentgh in keeping unscrupulous swindlers from continuing to use tax as a vehicle for their malfeasance.

Wednesday, June 27, 2007

Vouchers -- The Ad Hominem's Continue.......

Rob at the Amicus posted the latest of posters from (I believe) Utah Democrats. This one is a winner. This poster is titled "White Flight," in reference to Southerners use of tax-funded private schools in the early days of desegregation as a means of continuing segregation despite Brown v. Board of Education. The picture incorporates images of white folks marching with the confederate flag in protest of desegregation. So what is the intent of this poster......

A commenter tried to defend the poster with the following:

"nowhere do I see any comparisons of voucher supporters to "racist, Confederate flag-waving segregationists from the 1950s South.' "

I'm afraid I don't bite on the poster, or the anonymous commenter's defense of Utah Democrats. Despite the lack of language affirmatively calling voucher supporters racists, it doesn't take a genius to see that the "racist" implication is (to say the least) mildly being suggested. The clever use of negative images (the Confederate flag) is a subtle but clever way of calling someone a racist without actually saying it.

What else are voucher opponents telling us using this argument, lets pause and think about this?

1.)Utah's voucher program is designed to benefit the lowest income students: The script regarding poverty is that it effects minorities first and Caucasians last. So, the reasoning behind "White Flight" fails the first test. Utah's voucher plan is designed (following the White Flight" logic) to benefit minorities first. The poster shows that voucher opponents don't embrace the state's move to provide equal opportunity for less advantage minorities to choose the best suited schools for their children.

2.) Utah schools are succeeding in spite of themselves: One commenter and many voucher opponents have stated in opposition to vouchers that vouchers can serve no purpose with a school system that is flourishing. However, these concerns about "white flight" (not considering the racial stereotyping involved here) show that voucher opponents fear strong students leaving public schools. If Utah's public schools were as great as voucher opponents like to believe, then what difference does it make if strong or weak (minority or Caucasian) students make up the student body. It is a unintended admission that Utah schools succeed in large part to the quality of the students and parents (and some teachers) and in less part due to the bureaucracies which run Utah's schools.

3.) Utah Democrats are perpetuating racial stereotypes: Since we are going to (however subtly) through around accusations of racism. It seems to me, that the Utah Democrats are perpetuating the myth or stereotype that minority students are less apt or able to achieve in academics. Taking seriously the wild assumption that due to vouchers alone Caucasian students will leave Utah schools in droves large enough to constitute the catch phrase "White Flight"; why is there an issue with which students leave a system that is excelling in its job to educate all students? They are, however ambiguously, demonstrating a (in most cases mild) belief in certain racial stereotypes.

The Daily Herald rightly awarded this a "Buffalo Chip Award". Excrement from a large free roaming herbivore seems like an accurate depiction of this piece from the Utah Democrats. Please bring back some intelligent dialogue on this issue.

Tuesday, June 26, 2007

Big Brother?

This was a little creepy.

My boss, whose office is right next to mine, said he saw a SUV drive by snapping pictures of my office. I didn't see it in the act because I was in the lobby with a client, but I went outside and saw the SUV and a family getting out of the vehicle taking pictures like my office building was a tourist attraction.

I think it's nothing, but I took a license plate number just in case.

Monday, June 18, 2007

Vouchers -- Bureaucratic Turf War

At Steve Urquhart's blog he commented on some of the bureaucratic infighting that seems to be the norm between the Board of Education and legislative committees. State Board Chairman Kim Birmingham in an email respectfully, although in my opinion with a little spite, refused to come to the table with a committee of the Legislature to discuss education issues.

Last week I read a post at KCPW regarding pleas and desires of Governor Huntsman that the State's Education Bureaucracy and the Legislature resolve differences and move past vouchers and the rancor that has existed between the two throughout much of the voucher debate. The first two commenters on the post were Pat Rusk (former NEA president & current Utahns for Public Schools leader) and Sylvia Anderson State representative from district 48. The comments went like this:

Pat Rusk Said,

"Residual impact"? The voucher rancor has clouded every single legislative session for nearly a decade. The past few months have simply brought the issue before the public. Educators working to secure funding and respect for public schools and public school employees have met with the "vouchers or else" mentality for years. Residual impact? You bet there will be residual impact. Many legislators hold not only citizens, but each other hostage with their power. But fortunately the public will now see what many of us have dealt with for years. THEY can end not only the voucher nonsense but also reign of those legislators whose superiority over the rest of us must never be questioned."

Sylvia Andersen Said,

"As a new Legislator, I am surprised and saddened at the "them against us" attitude the pervades the discussion about education. I came to the Hill hoping to be in the Legislature what my role in life has been, that of a peacemaker and facilitator. I met with a couple of leaders in the UEA even before being elected, I suggested a meeting in which a representative of each group associated with educating our young people would gather around a table, putting the needs of our children in the center of the table, and offer constructive suggestions of how address those needs. I suggested that we should have a member of the Board of Education, a member of each of the different organizations that educate our youth; Home Schoolers, Private Schools, Charter Schools, Public Schools; the PTA and Parents for Choice represented at that meeting. The Response to my suggestion was "I won't meet with Parents for Choice!"

How can we ever improve our educational system with this obvious need to control all that is related to education so prevalent in the attitudes of those who are supposedly serving our youth. I have been so immersed in an atmosphere of "protect your organization's territory at all costs" that it is difficult to see where these organizations prioritize the needs of our children. Is it before or after protecting their own organization and the power they wield? Can it be that it is more important to maintain the status quo of control over funds, power, and our children than addressing all possible options for improvement? Can any one organization possibly think that "they" know what is right for every child and every family? Can any group be so insecure regarding their viability that they refuse to consider ANY other options that would include change? Can we as citizens feel that it is our right and need to control the opportunities for each tax-paying family to determine what will serve the educational needs of their child(ren)best?
I believe that if we worked TOGETHER to address the serious issues surrounding education, without concern for "protecting our territory" we could find the answers, implement the change, and secure a path of success for every child in Utah.


We, as Legislators TOGETHER, passed the largest increase in funding for education in the history of our state. As a percentage of increase, it was the largest in the US. If funding is the measure of our commitment to education, then how can it be doubted?

I know that every Legislator with whom I work is dedicated to doing what is best for their district and the State as a whole. I have not found a single Representative who displays and air of superiority, each has sacrificed a great deal to serve their fellow citizens.

Since then there have been a few other commenters on that post, including Kim Horiuchi, Dixie Allen and others. The former and later commenters were very articulate and even handed in their arguments respectively. However, Ms. Rusk and Andersen provided a very telling look at the bureaucratic infighting that is clouding this debate.

I am afraid that much of this rancor amounts to a proverbial turf war. Some educators (although I disagree with the term "educrat", some look like ducks, walk like ducks, sound like ducks, and therefore are likely ducks) seem wholly opposed to vouchers because it is out of the realm of the classic public education system and a personal affront to their worth. While some elected representatives have come close to using dictator-esque force in dealing with the education bureaucracy.

We have clarity in the referendum vote, and we have many solid arguments for and against vouchers that should be addressed. May the bureaucracies of this state do as the governor recommends, move on with the business of running the state.

From this post, I think it is demonstrative of the stifling, group think, effects that bureaucracies have on innovation and progress.

El Cartoonista had it right with his recently censored cartoon. What is best for Utah's children?

This is the last time I will harp on the tone of the voucher debate. (My wife says the blog is getting stale)

Friday, June 15, 2007

Southern Utah Boy Scouts Exercise Freedom of Speech


I opened the The Spectrum.com to this picture on their homepage, I was taken back until I read the headline. HAHA.
Just a little bored today.

Tuesday, June 12, 2007

Vouchers -- Censorship by the Davis County Clipper

This is a pretty cool cartoon.

I can't believe it wasn't printed by the Davis County Clipper, it is probably one of the most insightful local politcal cartoons I have seen.

Vouchers -- Let the Ad Hominem Arguments Begin

It started a few weeks ago, with a local article where SLC's NAACP chief Jeanetta Williams equated Utah's voucher program with segregationism. Today, Rob over at Utah Amicus took the ad hominem arguments another direction. In Rob's post today he posted a video of Friedman arguing for the legalization of drugs with the caption, "Does this mean PCE will start a group called, Parents for Choice in Drug Legalization?"

I had been hoping that these type arguments wouldn't become part of such an important debate. However, I guess I was naive in my hopes. The one bright spot in hearing these poorly crafted arguments coming from the anti-voucher corner is that ad hominem attacks have always (at least to me) been a sign of someone being on the losing end of an argument.

BTW, I agree with Jeremy who commented, "I bet they would if they watched this whole video. Friedman was exactly right in arguing against our wasteful "War on Drugs". We've incarcerated a higher percentage of our population than any other nation on earth because of our government's foolish and obsessive focus on our idiotic drug policy. If you are trying to marginalize Friedman you should choose a different video of him. He's absolutely right in this one." Point is -- marginalizing voucher advocates like Friedman with poorly crafted ad hominem attacks does nothing to meaningful contribute to the debate, it makes those using these type arguments, like the argument in Rob's post, look like dirty mud slinging politicians. I hope people see through this crap.

UPDATE: Judging from the tone of comments it appears that readers think I am beating up on Rob too much. Rob's post was being used as an example. There are poorly crafted ad hominem attacks from the pro-voucher side as well. (i.e. the ridculous assertions of a 4th "education" branch of government and the charges of legislating from the bench after the Utah Supreme Court gave the same people making the afore mentioned assertions the decision they requested (not what they wanted)) I hope this levels out the post so that fans of Rob can stop feeling jaded.

P.S. I apologize if this seemed like a personal attack on Rob. I hold Rob in the highest regard.

Thursday, June 07, 2007

6 Years Later


(John Canlas Photography the photographer's blog)
My wife and I had faux engagement photos for our anniversary. Six years later, and I'm hairless and very happy.