, , , , ,

A Sweeter Tax Than Most

, , , , ,

When you hear the word "tax," you probably think of something the IRS takes out of your paycheck. Or you might think of something they take out of an inheritance. But taxes affect virtually every financial transaction you make. Take, for example, that simple jar of honey lurking on the shelf in your refrigerator.

Americans eat more honey than anyone else in the world — about 400 million pounds of it a year. Most of it goes towards sweetening foods like cereals, cookies, and breads. Even whiskey producers are adding honey to their blends to attract younger drinkers. (The Scotch Whiskey Association just stung Dewars for labeling their new "Highlander Honey" as "scotch" rather than "spirit drink.")

,

When the IRS Comes a-Knockin'

,

If you get an IRS audit notice, you probably expect to spend hours responding to endless document requests, visiting bland government offices, and meeting with faceless bureaucrats. You might hope you get lucky and find yourself assigned to a pleasant, friendly examiner, one who acknowledges how intrusive and annoying the audit process can be. But you certainly wouldn't expect to wind up in bed with the auditor!

Vincent Burroughs is a 40ish contractor and amateur motorcycle racer in Fall Creek, Oregon. When the economy collapsed in 2008, his business suffered and he got behind on his taxes. In 2011, the IRS came calling. The auditor, Dora Abrahamson, recognized him from his motorcycle racing, and apparently liked what she saw. Burroughs claims Abrahamson started flirting with him over the telephone and by text message ("[I] need a hug badly, do you have one?"), offered him massages, and even sent him a "selfie" in a revealing pose!

Role Models (Not!)

Every year, the IRS Criminal Investigation unit releases an annual report detailing how they pursue and prosecute tax-law violations. It's full of the usual dry statistics you would expect from any IRS report: investigations launched, tax preparers indicted, identity thieves sent to prison, and even average sentences for different crimes (29 months for tax preparers, 64 months for money launderers). But it also includes some surprisingly entertaining stories about the people the Criminal Investigations unit targets — the kind of stories that make feel better about our own choices in life. Having a bad day? You'll cheer up when you read about these geniuses!

,

When 20 > 20.1

,

Labor Day has come and gone, and, while fall isn't "officially" here, it's time to put away those summer whites. Never mind that the mercury is still hitting 100 degrees in parts of the country; forget about those pennant races still heating up in the AL West and NL Central. This weekend, the National Football League kicks off regular season play! This week's season opener is just the first step on the road to Super Bowl XLVII, to be played outdoors on February 2, 2014, at the Meadowlands in New Jersey. (If you look hard enough on ESPN, you can find pre-game coverage starting early next week.)

Earlier this year, Baltimore quarterback Joe Flacco won MVP honors in Super Bowl XLVII and signed a new six-year contract worth $120.6 million. It makes him the highest-paid player in the game, just ahead of New Orleans quarterback Drew Brees. But in a surprise twist that NFL statisticians would love, Brees will actually take home more money than Flacco.

How can that be? Taxes, of course — why else would we be talking about it?

Hit 'Em Where It Hurts

When people misbehave — badly enough — they go to jail. But when corporations misbehave, they can't go to jail. So they pay fines instead. Recent years have brought a wave of enforcement actions for various corporate offenses, from banks ripping off customers, to investment managers trading on inside information, to drug companies poisoning patients, to energy producers polluting public waters.

Corporations usually find a little bit of silver lining in those monster settlements. They get to deduct the payments on their taxes! You like that? You and I get to help pay the freight for their cheating!

Now, Section 162(f) of the Internal Revenue Code states that "no deduction shall be allowed . . .

, ,

Are you sitting down?

, ,

Let's start by saying that no one likes getting audited. But the average income tax audit isn't the end of the world. For tax year 2012, the IRS audited just 1,481,966 returns out of over 143 million filed, or barely one in a hundred. And according to the IRS Databook, the average "deficiency notice" demanding more tax was just $10,331. That's nobody's idea of a party, of course. But it shouldn't bankrupt anyone who makes enough to owe that much extra tax.

Things are a little different when it comes to estate taxes. For starters, the tax applies to the value of your assets, not the income they produce. It doesn't kick in until your taxable estate after all deductions tops $5.25 million ($10.5 million per couple). But the tax itself is 40%, which is higher than the top income tax rate. With so much more at stake, the estate-tax audit percentage is naturally far higher than the percentage for income tax — for 2012, the IRS audited 3,762 out of 12,582 estate tax returns filed, or nearly one in three. As for the average deficiency, well, here's hoping you're sitting down — it's a whopping $305,529!