Friday, August 27, 2010

IRS Will Tan Your Hide

When I was a young boy my dad would occasionally threaten to “tan my hide,” meaning that I was about to get a spanking. Well, it looks like Congress and the IRS are now passing out spankings of a financial nature to anyone who uses the services of an indoor tanning salon. The Patient Protection and Affordable Care Act levies a 10 percent excise tax on indoor tanning services. The act was effective July 1, 2010, and requires all indoor tanning salons to charge their customers a 10% excise tax for the use of a tanning bed. The tanning customers may not be the only ones getting their hide tanned because if the customer fails to pay the tax, the tanning salon is liable for it.

There are exemptions from the tax, though, for phototherapy services performed on premises by licensed medical professionals, spray-on tanning services, and certain physical fitness facilities that offer tanning as part of their services without a separate fee. Looks like the fitness club industry has a pretty good lobby, wouldn’t you say?

Tanning salons are required to file the newly revised Form 720, Quarterly Federal Excise Tax Return. Have you seen this thing? If you count the Payment Voucher it is 7 pages long!

Indoor tanning services tax is reported in Part II on page 2 along with the excise tax on bows, quivers, broadheads, fishing tackle boxes, electric outboard motors, fishing poles, and arrow shafts. If tanning beds are so dangerous to your health, maybe it should be reported over on page 1 of Form 720 along with diesel fuel. What do you think?

Friday, August 20, 2010

Circular 230 Rides Again

This week the IRS proposed amendments to Circular 230 to help regulate tax return preparers by making all return preparers subject to the circular’s requirements. The proposed amendments would do the following:

· Define “Practice before the Internal Revenue Service” to clarify that either preparing a document or filing a document may constitute practice before the IRS.
· Establish a new “Registered Tax Return Preparer” designation. (They will probably become RTRP’s don’t you think?)
· Define eligibility to become a Registered Tax Return Preparer. (The regulation of unregistered tax preparers currently being proposed by the IRS.)
· Amend the rules regarding continuing education providers.
· Establish standards for the preparation of tax returns.
· Make RTRPs subject to the solicitation, incompetence and disreputable conduct sections of the circular.

The service also announced that they will stop issuing PTINs effective August 22nd. If you apply for a PTIN before August 22nd. you will have to reapply once the new comprehensive PTIN system is in place. Won’t everyone have to reapply?

The AICPA says that it supports the general goals of improving compliance and raising ethical conduct but has serious concerns with a number of implementation steps (See Journal of Accountancy, “IRS Moves Forward With Preparer Registration Plan,” August 19, 2010). Is requiring compliance with Circular 230 a good plan that will improve tax compliance and ethical standards or is it just more government red tape? What do you think?

Friday, August 13, 2010


At least not if it’s a Form 706 Estate Tax return because they don’t know what to do with them and don’t have a place to store them. Congress can’t seem to get its act together to address a fix for this dilemma and so the estate tax will probably remain in limbo at least for the rest this year.

For some tax payers, this is an unbelievable windfall. Take George M. Steinbrenner for example, the late owner of the New York Yankees. George passed away in July 2010. At the time of his death, his net worth was estimated at somewhere around $1.15 billion. And guess what, if the current estate tax regulations are not changed, George’s heirs will owe exactly zero taxes on his estate. Oh to be so lucky. Not George of course, but his heirs. The current estate tax provisions were part of the Economic Growth and Tax Relief Reconciliation Act of 2001 and will end on December 31, 2010. Next year the tax rate will return to a graduated rate with a maximum of 55 percent.

The old saying, “You can’t take it with you,” is still true, but with the current estate tax rules you can sure leave a lot more behind for your friends and relatives. What do you think?

Tuesday, August 10, 2010


I am betting that you don’t have a clue. The reason that I don’t think you really know what taxes you pay is because so many of them are hidden. Take for instance the employer’s portion of your payroll taxes that help fund Social Security and Medicare. These taxes are usually not shown on your pay stub, but they are ultimately passed on to you in the form of lower wages.

It is estimated that some 37% of federal taxes are hidden. A study by the Institute of Policy Innovations suggests that hidden taxes amount to $2,462 per person annually. So what are some of these hidden taxes?

Take gasoline for instance. Approximately fifty cents of the price you pay per gallon goes to pay state and federal taxes. Then there are the sin taxes on alcohol and tobacco. How about the travel taxes on air fares, taxis, car rentals and hotel occupancy? In addition to these that are sometimes actually labeled as taxes there are others that are cleverly disguised as “fees.”?

Just take a look at your cell phone bill. I did and here is what I found. In addition to the state telecom tax, the city telecom tax and the state sales tax, there was the Regulatory Cost Recovery Charge, the Federal Universal Service Charge (whatever that is), the Franchise Tax Recovery Fee and the 911 Service Fee. Thirteen percent of my bill each month is not for the cost of making calls but rather for taxes.

Politicians know that if they raise income or property taxes we will notice and complain. So what do they do? They have businesses add these “taxes” to their products and services and call them fees.

I think that the government is better at picking our pockets than any professional pickpocket. What do you think?