Tax Season Tribune

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Don’t do the crime if you can’t do the (unusual) time

By Austin Lewis

Managing Editor

Dozens of shoplifters hit a Walmart in Grand Blanc, Michigan, over the past few months, but it’s the store’s other shoppers who will be making a clean getaway.

That’s all thanks to Genesee County District Court Judge Jeffrey Clothier, who sentenced the 48 shoplifters to four weekends of free car washes in the store’s parking lot.

"I came up with a wash for Walmart. Everybody who's here in the courtroom today is going to be doing community service, washing cars, so the people that actually go to Walmart and pay for their goods, they are going to get a free car wash from the people that think it's a good idea to go there and steal," the judge told a Michigan TV station.1

According to the Associated Press,2 the judge believes as many as 100 people will take part in the Walmart washes this March and April. And they’ll be joined by the judge himself.

Fast food fight

A judge in Ohio cooked up a creative punishment in 2023 after a Chipotle customer threw her burrito bowl at an employee because she didn’t like how it looked.3

Parma Municipal Court Judge Timothy Gilligan said the food-flinging customer could have her jail sentence reduced by 60 days if she spent two months working a fast-food job instead.

“I bet you won’t be happy with the food you are going to get in the jail,” he said.

What would you do?

It’s the middle of tax season, and any tax professional reading this is probably reminded of that one client that is trouble every single year. If you were judge for one day — April 16, let’s say — what punishments would you come up with? Mandatory paperless/PDF account statements for anyone who comes in with a box of unorganized paperwork? Two weeks of work with no days off for anyone who doesn’t give you their W-2s until after April 1?

E-mail us at editor@spidell.com with your punishment ideas and we’ll share them in a future issue.  Here's one from Mike Giangrande to get you started: “Spend 12 weeks reading the Internal Revenue Code for 8 hours a day. If you fall asleep, you have to start over.”

A five-star audit

By Kathryn Zdan, EA

Editorial Director

Tax agencies have long used taxpayer social media accounts to troll for information during an audit. In this TMI age, the IRS and state tax agencies use taxpayer social media accounts to compare taxpayers' reported income against their visible lifestyle on social media; confirm business service offerings and pricing; check event announcements for possible unreported revenue; and use social connections to reveal potential unreported business relationships.

But even if the taxpayer isn’t the one posting images online, customers might be.

An Orange County, California, nightclub was found to have underreported its taxable sales by approximately $1.85 million after an audit revealed unreliable information regarding its purchases.1 During an audit from the California Department of Tax and Fee Administration (CDTFA), which administers California's sales and use taxes, the CDTFA determined that the nightclub’s liquor markup percentage (which was around 40%) was far below normal, indicating understated sales.

Purchase records from the nightclub’s vendors showed beer purchases, but documentation for liquor purchases was largely absent. The CDTFA examined Yelp reviews of the business, where photos and videos showed a fully stocked bar with various name-brand liquors. Based on these images, the CDTFA estimated that the taxpayer’s liquor purchases equaled its beer purchases (a 50:50 ratio).

Using this ratio and a 463.40% markup from a prior undisputed audit (which is a normal markup percentage for a bar/nightclub), the CDTFA calculated unreported taxable sales of $1,854,547, resulting in unpaid tax of $145,000.

1 Appeal of La Boom Entertainment, Inc., 2024-OTA-305

Taxes and architecture

Certain styles of building could be the result of creative genius or… tax policy. Here are some examples of architectural design influenced to get around tax laws of the time:1

  1. In the 18th and 19th centuries in England, France, and Ireland, taxes on windows led building owners to brick over existing windows to avoid paying the tax.
  2. Narrow houses in Amsterdam were a response to a 16th century building tax that was calculated based on the width of the building’s façade.
  3. Paris taxes that were levied on the number of floors below the roof line could be lowered by a Mansard-style roof.
  4. In present day Greece, properties with pools are subject to a luxury tax, causing some pool owners to dye the water green so the pool is less visible from satellites searching for pools to tax.

A few fun facts about this week’s writers:

Kathryn Zdan, EA

Kathryn Zdan, EA, spends her non-Spidell hours on photography and watching horror films (and then sleeping with the light on). She also enjoys hiking, biking, and watching foreign films.

Austin Lewis

Austin Lewis loves music and the outdoors, and if he’s not going to a concert you can probably find him on a hike somewhere. Last summer he traveled to Peru, where he spent seven days on the Salkantay Trek to Machu Picchu.

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