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Thread: “Make no mistake, tax cheaters cheat us all,

  1. #1
    Senior Member Hew's Avatar
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    Default “Make no mistake, tax cheaters cheat us all,

    ...and the IRS should enforce our laws to the letter,"

    Tiny Tom Dashle, Congressional Record p. S4507. May 7, 1998

    Geithner I can understand...a fresh face, supposedly very competent at what he does, and committed a relatively minor (in the grand scheme of things) tax faux pas. Dashole...not so much. That smarmy little SOB came to Washington without a pot to piss in and now he's a multi-millionaire K Street lobby flack; complete with a wife and son also suckling from the DC teat. I hope he's made to squirm alot and then have his nomination declined or yanked.

    Even the NY Times is now calling for his head.

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    Senior Member luvmylabs23139's Avatar
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    Geither is actually even worse IMO. SS taxes are something everyone knows you have to pay. PLus he actually got money form the IMF to pay those taxes, if that doesn't send up a clue to person that those taxes are due I don't know what does. Additionally, Geither is a financial person claiming ignorance of a basic part of the tax code.
    Dashle has other issues that to me are even bigger than not knowing an obscure part of the tax code. He can't be objective in the position. He has too many ties to the drug industry to do the job in the best interests of the public.

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    Senior Member YardleyLabs's Avatar
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    Quote Originally Posted by luvmylabs23139 View Post
    Geither is actually even worse IMO. SS taxes are something everyone knows you have to pay. PLus he actually got money form the IMF to pay those taxes, if that doesn't send up a clue to person that those taxes are due I don't know what does. Additionally, Geither is a financial person claiming ignorance of a basic part of the tax code.
    Dashle has other issues that to me are even bigger than not knowing an obscure part of the tax code. He can't be objective in the position. He has too many ties to the drug industry to do the job in the best interests of the public.
    Not to argue the point, but Geither was actually an unusual situation. He had been a W-2 employee his entire life and was a salaried employee at his last position. However, because of the specifics of his situation his income was treated as self employment income for purposes of paying social security taxes meaning he had to pay both the employer and employee shares. I believe he reported his income as W-2 income and only paid the employee share as a consequence. When I was a partner at Ernst & Young, this was actually one of the common mistakes made by newly promoted partners, almost all of whom were CPA's. The firm would actually send each of the new partners warnings to remind them that they needed to pay at the higher rate.

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    Senior Member luvmylabs23139's Avatar
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    Jeff,
    Any CPA should know the difference between a W-2 and a 1099. MY memory is a bit foggy as it's been years since I took the CPA exam but I think there were a ton of questions about that sort of stuff on the exam. It is accounting 101 in college, so as far as I'm concerned it was a direct attempt to avoid income taxes.
    It's been a while since I practiced accounting by the basics are still drilled into my brain.

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    Senior Member YardleyLabs's Avatar
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    Quote Originally Posted by luvmylabs23139 View Post
    Jeff,
    Any CPA should know the difference between a W-2 and a 1099. MY memory is a bit foggy as it's been years since I took the CPA exam but I think there were a ton of questions about that sort of stuff on the exam. It is accounting 101 in college, so as far as I'm concerned it was a direct attempt to avoid income taxes.
    It's been a while since I practiced accounting by the basics are still drilled into my brain.
    You're right. The difference is that he was not a 1099 employee. He was a W-2 employee. However, the IMF as an international organization is exempt from paying the employer share of of FICA/FUTA taxes. The IRS directives state:

    "Services for International Organization: Compensation for services performed within or outside the United States by an employee or officer (regardless of citizenship or residence) of an international organization is not considered to be wages for Social Security and Medicare tax purposes. For U.S. citizens the income paid for services rendered to an international organization is reportable as self-employment income on their U.S. federal income tax returns, and is subject to self-employment tax to the extent such services are performed within the United States."

    The IMF warns employees of this oddity in the tax code. However, it is not something known by most tax accountants or handled correctly by most tax packages (I know this from personal experience.). If the income is entered as a salary, which it is, tax packages will calculate the employee share as the amount payable. This is what happened initially when Geither's taxes were completed by a tax accountant. Geither then filed the same way when he did his own taxes.

    The complaints against him were two-fold. First, he had been warned of this issue when he started work at the IMF. Second, he was criticized because, when the IRS first found the problem during an audit he only paid the amount they requested. He did not go back and pay amounts that should have been paid for two prior years which were not addressed by the audit because they were outside the statute of limitations. After he was nominated, he went back and paid the amounts that he legally did not owe.

    I am not defending his mistake. I am simply making the point that it was not as straightforward as is implied by the statement that "SS taxes are something everyone knows you have to pay." or as obvious as income reported on a 1099.

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    Senior Member luvmylabs23139's Avatar
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    Quote Originally Posted by YardleyLabs View Post
    You're right. The difference is that he was not a 1099 employee. He was a W-2 employee. However, the IMF as an international organization is exempt from paying the employer share of of FICA/FUTA taxes. The IRS directives state:

    "Services for International Organization: Compensation for services performed within or outside the United States by an employee or officer (regardless of citizenship or residence) of an international organization is not considered to be wages for Social Security and Medicare tax purposes. For U.S. citizens the income paid for services rendered to an international organization is reportable as self-employment income on their U.S. federal income tax returns, and is subject to self-employment tax to the extent such services are performed within the United States."

    The IMF warns employees of this oddity in the tax code. However, it is not something known by most tax accountants or handled correctly by most tax packages (I know this from personal experience.). If the income is entered as a salary, which it is, tax packages will calculate the employee share as the amount payable. This is what happened initially when Geither's taxes were completed by a tax accountant. Geither then filed the same way when he did his own taxes.

    The complaints against him were two-fold. First, he had been warned of this issue when he started work at the IMF. Second, he was criticized because, when the IRS first found the problem during an audit he only paid the amount they requested. He did not go back and pay amounts that should have been paid for two prior years which were not addressed by the audit because they were outside the statute of limitations. After he was nominated, he went back and paid the amounts that he legally did not owe.

    I am not defending his mistake. I am simply making the point that it was not as straightforward as is implied by the statement that "SS taxes are something everyone knows you have to pay." or as obvious as income reported on a 1099.
    OK, lets add that a child's summer camp is not child care expense, and he darn well should know that based on his professional credentials. That is something that any practicing accountant would be ethically bound to tell a client " NO, you can't claim that!".That naturally assumes that the accountant knows it is a summer camp expense. He attempted to avoid taxes, not that I really blame him as we all want to pay as little as possible.

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    Senior Member YardleyLabs's Avatar
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    Quote Originally Posted by luvmylabs23139 View Post
    OK, lets add that a child's summer camp is not child care expense, and he darn well should know that based on his professional credentials. That is something that any practicing accountant would be ethically bound to tell a client " NO, you can't claim that!".That naturally assumes that the accountant knows it is a summer camp expense. He attempted to avoid taxes, not that I really blame him as we all want to pay as little as possible.
    Once again, the devil's in the details. If you send your child to day camp and otherwise meet the tests for the credit, it is valid. Overnight camp would appear on the surface to meet the requirements for a child care credit except for the fact that it is specifically excluded. Logically, it's not clear to me why this is treated differently from other types of child care, but it is.

    I spent a good part of my life filing my own returns for both Federal taxes and state and local income taxes in more than 50 separate jurisdictions around the United States as well as in 20 different foreign countries. On average, my return was longer than 100 pages. The amount of arcane detail and illogic in our tax codes can befuddle the most honest person. Personally, I love the simplicity of the system in Pennsylvania -- everything is income without exception. Everything is taxed at the same rate. There are no exemptions, deductions, or other tax preferences. Filing taxes takes a few minutes at most and two families with the same income always pay the same amount.

    Unfortunately, every effort to simplify the Federal tax code results in even more complications being introduced as proponents of every possible special case argue for one form of favoritism or another.

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    Senior Member K G's Avatar
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    Just heard on the radio that Daschle bailed on his nomination....now we're gettin' somewhere!!!

    There's a reason he wasn't re-elected regards,

    kg
    I keep my PM box full. Use email to contact me: rockytopkg@aol.com.

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    Senior Member Ken Newcomb's Avatar
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    Jeff;

    I agree it is a potential mistake a lot of people could make, but, he is not supposed to be a lot of people. He is supposed to be THE very best person to run the IRS, thus it is a mistake he shouldn't make.
    Some people dream of success, while others wake up and work hard for it.

    "Five in the hole is better then 250 circling overhead." - Jase Robertson

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    Senior Member YardleyLabs's Avatar
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    Quote Originally Posted by Ken Newcomb View Post
    Jeff;

    I agree it is a potential mistake a lot of people could make, but, he is not supposed to be a lot of people. He is supposed to be THE very best person to run the IRS, thus it is a mistake he shouldn't make.
    No, he's supposed to be a top economist and economic policy expert that might, if we are all lucky, be able to formulate ways to mitigate the economic disaster we are now in. In my experience, few economists are anal enough to figure out taxes. For that you need an accountant who knows nothing about the economy and doesn't care. The IRS and the accounting firms are full of people like that and they still can't agree on what our laws mean. We don't need that kind of person at the top of the Treasury Department. Geither is simply going to have to learn what others in the public limelight have learned before: don't even try to do it yourself.

    For most of the eight years I worked in government at the beginning of my career (a long time ago) I was in enough of a political position that I never filed an expense report to claim reimbursement even for out of town travel done for my job. I was assigned a car because of the nature of my job but I refused to use it. On several occasions, I received phone calls or requests for meetings where I questioned the motives of those involved and arranged with investigators to have those calls and meetings taped. In one situation this resulted in the resignation of a top state official who, as a consequence, was forced to take a job paying five times more in the private sector.

    Even with that kind of defensive mentality, I ended up facing a potential scandal at one point where, among other things, my wife's medical records were copied and sent to every newspaper, union and major elected official in the state alleging that I had abused my position to obtain subsidized care for her. An independent audit that I requested showed that we had actually overpaid by a significant amount and the story died.

    The moral, if any, is that we ask a lot of our public servants and we offer them little but abuse in return. We may turn up some crooks in the process. However, what I find amazing is that any honest person would accept the job at all. When you treat everyone like a crook, you will eventually find that only the most successful crooks will put up with you; the honest people will stay home.

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