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April 1, 2016
Tax Humor: Happy April Fools' Day From Tax Notes

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Apple Overseas Cash Hoard 'Offensive,' Smaug Says

Congress Authorizes LOL Carryback, Memories Now Hilarious

'Feeling the Bern' Classified as Deductible Medical Expense

New Partnership Audit Bill Follows 'Choose Your Own Adventure' Model

In Lieu of Repatriation Tax Holiday, Congress Offering Coupons to Applebee's

'Can Someone Please Answer the Phone?' Koskinen Shouts From Sofa

IRS Engages Gambino Family for New Private Debt Collection Initiative

OECD Reorganizes Under Cayman Islands Holding Structure

IRS Nicknames New 'Future State' Program 'SKYNET'

Ryan Vows Not to Shave Until Comprehensive Tax Reform Passes


IRS Future State Plans Take Unexpected, Fuzzy Twist

Details continue to emerge regarding the IRS's secretive plans for its "future state," and the latest news happens to be some of the cutest. The agency has long said that it plans to increase the role technology will play in tax administration, and it announced April 1 that it will be distributing automated "Tax Buddies" to every household in America.

"I never thought I would say this, but the IRS bought the rights to Teddy Ruxpin," said Gil Daniels of Tax Tacklers LLP. "The former owners had millions of those talking bears, unused since the '80s, and they were headed for the incinerator. It was a right-place, right-time kind of deal. The first words out of those bears' mouths should be, 'Thank heaven for the IRS.'"

"It's an incredible brand enhancer," an IRS spokesman said. "The Tax Buddy can answer tax-related questions, you can access a data screen by rubbing its belly, and we've programmed it with some excellent tax jokes. I think this could change the whole ballgame. I mean, it's hard to hate the tax man when he's also your best friend."

Results from the pilot program indicate a tough road ahead, however. "The voice sounds a lot like Siri," said Jill Anderson of The Taxtonics. "Is that legal? Can you just steal Apple's technology? I find it works OK, but for some reason when I ask it about passive losses, it directs me to the nearest Outback Steakhouse."

Abe Flowers of Tax-Ability said, "My Tax Buddy is great. I'm hoping for the best. He brings back memories, and he has a real smile factor that the IRS desperately needs." Still, Flowers added, "He's a tough cookie when it comes to deductions. I actually sent him back to the agency because I thought he was broken. Denied, denied, denied. He's funny about it -- he once asked me whether I was 'fur real.' But I need him to be a little less teddy bear friendly and a little more taxpayer-friendly."

Cathy Miller from Totally Tax was less enthusiastic: "It's creepy. That's all I can really say. It just stares at you with those dead little eyes and drones on and on about the Pease limitation. Every night before I go to sleep, that thing goes in a drawer, which I then lock. I've been thinking about moving to Canada, and maybe it's finally time."

According to the IRS, rollout will proceed on schedule, and taxpayers in most major cities should expect to see their Tax Buddy waiting on the doorstep no later than June 1.


Kansas Celebrity Given Statutory Maximum for 'Leaver' Account

In one of the first criminal prosecutions directly attributable to a Swiss bank program non-prosecution agreement (NPA) disclosure, Dorothy Gale of Kansas was sentenced to the statutory maximum of five years in prison for tax evasion linked to an undeclared foreign account, the Justice Department announced April 1.

According to the announcement, Gale closed her Swiss account in 2013 and transferred the funds to an account in an Emerald City, Oz, bank under the name of a close friend, Albert C. Lion. The Justice Department Tax Division received the details of the transfer as part of the disclosures required under the Swiss bank program when Gale's former bank entered into an NPA with the Justice Department in 2015. The Justice Department declined to name either bank.

The district court judge for the U.S. District Court for the District of Kansas sentenced Gale to 60 months, the statutory maximum Gale faced for her convictions under section 7201 and 31 U.S.C. section 5322(a). Gale sought a downward departure from the sentencing guidelines determination based on her long history of good works and charity, particularly in Oz. She attempted to compare her case favorably with that of Beanie Babies founder H. Ty Warner, whose sentence of probation was recently affirmed, in part due to a history of good works.

The sentencing judge rejected the comparison, noting that unlike Warner, Gale never tried to disclose her accounts and also moved her account out of Switzerland in an attempt to hide it. "Clicking your heels together and hoping the problem will go away as though waking up from a dream is no way to solve a financial disclosure problem," the Justice Department said.

Gale's attorney, S. Reginald Crow of Crow, Woods & Mann S.A., an Oz-based law firm, said Gale plans to appeal her convictions -- claiming that the evidence of willfulness is lacking -- as well as her sentence.

Emily Baum of Frank & Baum LLP told Tax Analysts that the appeal of the conviction will be particularly challenging because of the timing of Gale's account transfer. Being a so-called leaver is strong evidence of intentional violation of a known legal duty, the standard for willfulness in criminal tax, she said.


Candy Man Indicted for Failing to Pay Employment Taxes

The Justice Department announced April 1 the indictment and arrest of chocolate magnate William "Willy" Wonka on employment-tax-related charges.

According to the announcement and charging documents, the IRS became suspicious when the multibillion-dollar business reported one, and only one, employee every year since resuming operations. Wonka is now the third largest chocolate producer in the world.

Arthur Slugworth, a competing chocolate manufacturer, told Tax Analysts, "Chocolate industry automation has advanced rapidly since Mr. Wonka suspended his business operations, but not so far that a whole factory could be run by just one man; he obviously has other people working for him."

The indictment contains six charges of failing to either collect or pay employment taxes under section 7202, one for each open year of the criminal statute of limitations under section 6531. While the limitation period for criminal tax charges is normally three years under section 6531, the indictment asserts that Wonka's complete failure to report any information about his workers to the IRS places his case in the willfulness exception, expanding the period to six years.

Charles Bucket, Wonka's attorney and friend, told Tax Analysts that the dispute would be better characterized as an accidental, or at best negligent, mistake. "He pays his workers in lodging and food they particularly love -- cocoa beans -- and thought that fit the exceptions for convenience of the employer."

Bucket is the only person, other than Wonka, known to have entered and returned from Wonka's factory since it resumed operations. Being a general business attorney, Bucket said he is looking for a lawyer who specializes in criminal tax cases to take over Wonka's defense, especially because Bucket may be called as a witness concerning Wonka's employment practices.

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