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Posts tagged: IRS

Why Idaho changed its tax-filing rules this week…

Idaho state Tax Commission David Langhorst says the commission wasn’t taking any policy stand when it adopted new rules this week that will have the effect of forcing Idaho same-sex couples legally married elsewhere to recalculate their federal income taxes from joint returns, in order to file separately in Idaho. That’s because Idaho’s state income tax returns, like those in many states, are based on the taxpayer’s federal returns. Idaho’s previous rules required taxpayers to use the same filing status on their Idaho returns that they used on their federal returns. But now that the IRS has ruled that same-sex couples who were legally married in states that permit such marriages can file jointly, there was a conflict between that rule and Idaho’s constitutional provision banning state recognition of same-sex marriage.

According to the Tax Foundation, 24 states both ban same-sex marriage and have state income tax systems that are tied to the taxpayer’s federal returns. “Every one of them is struggling with this,” Langhorst said. “The CPAs were really the ones calling us and saying, ‘You guys have to do something about this.’”

Gale Garriott, executive director of the Federation of Tax Administrators, said, “For those that recognize same-sex marriage, I don’t think it’s going to be much of an issue at all. For those that don’t, and have to tell each of the taxpayers how to identify their share of the joint income and how that affects their forms, that could be a little bit of a challenge.”

However, that same challenge previously was in place for states that recognized same-sex marriage when the IRS didn’t, like Massachusetts and Connecticut. In those states, if their state income tax was tied to the federal system, same-sex couples had to re-calculate between their state and federal returns in order to file jointly with the state, but separately with the IRS.

It’s not an issue in Washington state for two reasons: Washington recognizes same-sex marriage, and it doesn’t have a state income tax.

The Idaho Tax Commission’s new rules say the only taxpayers who can file joint state income tax returns are those whose marriages are recognized under Idaho law. New tax form instructions for 2013 direct those who file federal joint returns as a same-sex couple to file their state returns as single or head of household. They can either re-do their federal tax forms to figure out the differences, or submit the calculations on a worksheet.

“It is a lot of work,” Langhorst said. But, he said, “It is the only way that we could avoid the real headache of rejecting their returns. That would be the alternative. Then they would not have legally filed.”

Garriott praised Idaho officials for establishing their new rules early. “If people are given good instructions and plenty of notice, and even some examples, then it shouldn’t be that big of a problem,” he said.

Idaho changes state income tax forms to require same-sex couples to recalculate after federal filings

Idaho has changed its 2013 state income tax forms to require same-sex married couples who now will be filing joint returns at the federal level to recalculate their taxes and file separately for their state returns, the AP reports. “Your Idaho filing status must be the same as the filing status used on your federal return,” according to draft instructions posted on the Idaho Tax Commission's website. “This requirement does not apply to same sex couples who file a joint federal return; the State of Idaho does not recognize same sex marriages.” Click below for a report from AP reporter John Miller.

Hart says it’s fed lawyers who are lying to court, not him

Tax-protesting former state Rep. Phil Hart has filed his response to the U.S. Attorney and U.S. Bankruptcy Trustee's allegations that Hart lied under oath, concealed assets and income and more in his bankruptcy filings, insisting that he's done nothing of the sort and the IRS is just after him for “trumped up” and “exaggerated” tax liabilities. Targeting U.S. Justice Dept. attorney Adam Strait, Hart wrote in a declaration filed with the bankruptcy court, “It is Mr. Strait who is making false statements to the court, not me.” Hart says he thought the trust he put his house in was OK because he hired experts, and the unreported payments Strait identified were things like expense reimbursements and a $200 birthday gift from his mother. You can read my full story here at spokesman.com.

Former Rep. Hart may face federal criminal charges

Federal authorities may be laying the groundwork for criminal charges against tax-protesting former Idaho state Rep. Phil Hart. In bankruptcy court documents, federal officials are charging that Hart lied under oath, concealed or destroyed records and attempted to “hinder, delay or defraud his creditors, including the Internal Revenue Service.” The filings by the U.S. Bankruptcy Trustee and the U.S. Department of Justice are aimed at preventing Hart from being relieved of any of his tax debts through his latest bankruptcy case, but the implications could go well beyond that.

By law, federal bankruptcy trustees are required to refer suspected crimes to the U.S. Attorney for prosecution. In 2012, they referred 2,120 cases, with false statements and concealment of assets among the top five crimes charged; the No. 1 most-charged crime was bankruptcy fraud.

“We don’t comment on cases beyond what’s in the public record,” said Shannon May, spokeswoman for the U.S. Trustee Program in Washington, D.C. But she provided copies of the program’s annual report, including the legal requirements and figures about criminal enforcement.

The federal bankruptcy court filings, which have the effect of creating a lawsuit within Hart’s Chapter 7 bankruptcy case, turning it into an “adversary proceeding,” say Hart “retained a secret interest” in his log home in Athol for years after transferring it to a sham trust set up in his daughter’s name. He then denied owning any real estate in his bankruptcy filing, including statements under oath. And that’s just one of the many allegations in the filings. The Justice Department’s filing says Hart claimed to have paid $600 a month in rent to the trust in exchange for living in the home. But he said he “makes the purported rent payments to the Sarah Elizabeth Hart Trust by placing $600 in cash in a desk drawer in his home.” Then, the filing said, he spends the money, including for utility bills on the house. You can read my full story here from Sunday’s Spokesman-Review.

Federal judge clears way for foreclosure on former Rep. Hart’s log home

A federal judge has cleared the way for the Internal Revenue Service to foreclose on former state Rep. Phil Hart's Athol, Idaho log home over years of unpaid taxes, the AP reports. U.S. District Judge Edward Lodge ruled last week that Hart, a Republican, was still the true owner of the log home and that his attempt to transfer the property to a trust was ineffective. The judge also said Hart couldn't claim a “head of household” tax exemption because he had no dependents at the time.

Hart, who lost his bid for a fifth term in the Idaho House last year, stopped filing income tax returns in 1996 while he pursued a federal lawsuit challenging the constitutionality of the federal income tax. He lost the lawsuit and the IRS is seeking to collect more than half a million dollars in back taxes, penalties and interest. His home was built partly with logs taken from state school endowment land; Hart never fully satisfied a court judgment over the timber theft. He claimed as a citizen he was entitled to take the logs. Click below for a full report from AP reporter Rebecca Boone.

By the way, the reason that the foreclosure can proceed even though Hart's filed a third bankruptcy case is that a federal bankruptcy judge ruled in late February that Hart's third bankruptcy filing in one year is not entitled to an automatic stay on the foreclosure case, like the last two prompted. “The bankruptcy, when viewed in light of Debtor's previous two filings, appears intended to halt the progress of the federal litigation,” wrote U.S. Bankruptcy Judge Terry Myers, adding that Hart's petitions were “filed without regard to eligibility but with an eye toward delay and potential forum shopping.”

Tax-protesting ex-Idaho lawmaker’s funds to be probed

A bankruptcy judge has ordered a tax-protesting former Idaho state representative to submit to intense new scrutiny of his finances, something federal lawyers say is necessary to prevent him from hiding assets from creditors including the U.S. government, the AP reports. Phil Hart now must appear at a hearing May 20 in U.S. Bankruptcy Court in Coeur d'Alene, according to an order from Chief U.S. Bankruptcy Judge Terry Myers.

Hart, a Republican from Athol who lost his bid for re-election in the GOP primary last year, has been ordered by courts to pay the federal and state governments more than $600,000 in delinquent income taxes, interest and penalties. He filed for Chapter 7 bankruptcy protection in January after the U.S. government moved in 2011 to seize his log home in northern Idaho to satisfy debts; it was his third bankruptcy filing, after the first two were questioned as inappropriate and were either withdrawn or dismissed.

With his order, Myers is forcing Hart to submit to what's called a “Rule 2004 Examination,” a provision of bankruptcy law meant to untangle a debtor's murky finances; among other things, Hart must provide statements from every account he's controlled since 2011. Click below for a full report from Associated Press reporter John Miller. Hart told Miller, “My understanding is this is a normal process for a person going through bankruptcy.”

Feds file motion seeking immediate foreclosure on former Rep. Hart’s home

Here's a news item from the Associated Press: BOISE, Idaho (AP) — Government attorneys are asking a judge to rule in their favor in a federal tax case against ex-state Rep. Phil Hart and allow them to immediately foreclose on his northern Idaho log home. In a motion for summary judgment filed in federal court Friday, Assistant U.S. Attorney Kathryn Keneally said there are no disputes over the facts concerning 6 of the 13 years for which the government believes Hart owes back taxes, and so U.S. District Judge Edward Lodge should rule in the government's favor for that portion of the lawsuit. Hart stopped filing federal income tax returns in 1996 while he while he unsuccessfully sued over the constitutionality of the federal income tax. The Internal Revenue Service is seeking to collect more than $500,000 in taxes, penalties and interest. Click below for a full report from AP reporter Rebecca Boone.

Bankruptcy court tosses out Hart’s second filing, opens way for state, federal collection efforts

A federal bankruptcy judge has dismissed former Idaho state Rep. Phil Hart’s second bankruptcy filing, opening the way for federal authorities to go after his log home in Athol for back federal  income taxes, and for the state to launch collection efforts over his state tax debts. “We’re kind of in line behind the feds, and I’m not sure what’s going to be left,” said Bill von Tagen, deputy Idaho attorney general for the Tax Commission.

The federal foreclosure lawsuit already has geared back up; a federal judge issued an order today calling for Hart to submit to a deposition on Jan. 7 as part of the case. The tax-protesting four-term state lawmaker has been fighting court orders to pay more than $600,000 in back state and federal income taxes, penalties and interest; he’s lost repeated attempts to declare the taxes unconstitutional and to claim that  legislative privilege should free him from some or all of his tax debts.

You can read my full story here at spokesman.com. In September, Hart sent the state Tax Commission a copy of a 63-page appeal to the U.S. Supreme Court, in which, acting as his own attorney, he argued that the Idaho Supreme Court wrongly dismissed his legislative privilege argument and improperly scheduled a hearing at a time when he couldn’t attend because he was serving in the Legislature. Though that arrived at the state Tax Commission on Sept. 17, shortly before the deadline for such a filing with the high court in Washington, D.C., the U.S. Supreme Court never received the filing, and the deadline passed. In that appeal, Hart wrote that he’s a victim of “political persecution.”

Hart offers to pay just $3,816 to settle more than $626,000 in tax debts

Tax-protesting former Idaho Rep. Phil Hart, R-Athol, is now proposing in bankruptcy court to pay just $106 a month for three years to satisfy more than $626,000 in debts, a total of $3,816 - less than a third of the amount he proposed paying in his earlier, dismissed bankruptcy filing. The debts include more than $564,000 in back federal income taxes, penalties and interest, and more than $62,000 in back state income taxes, penalties, interest and court-ordered attorney fees and costs for the state. Hart appeared before a bankruptcy trustee Friday and refused to answer a barrage of questions.

Federal authorities have filed a foreclosure lawsuit seeking to take Hart's log home in Athol to satisfy his federal tax debts; that case was put on hold when Hart filed for bankruptcy in May, then started back up when his first bankruptcy filing was dismissed in August. Then, in October, Hart filed for bankruptcy again. Last week, a bankruptcy judge refused to postpone the foreclosure, finding that Hart had filed the second bankruptcy in bad faith. You can read a full report here from S-R reporter Scott Maben in Coeur d'Alene.
  

Hart files for bankuptcy - again

State lawmaker and tax protester Rep. Phil Hart has filed for bankruptcy — again — prompting a federal tax foreclosure case against him to be put on hold. Click below for a full report from AP reporter Rebecca Boone. Hart's new bankruptcy filing comes almost two months after he voluntarily dropped his previous one, acknowledging it was improperly filed under Chapter 13 of federal bankruptcy laws. His new filing is under the same chapter with largely the same circumstances.

Rep. Hart ordered to pay state $10K for attorney fees, costs in his state income tax appeal

The Idaho Supreme Court has ordered tax-protesting Rep. Phil Hart, R-Athol, to pay the state $10,128 in attorney fees and costs for his unsuccessful state income tax appeal to the court, finalizing a decision it first issued in June. At that time, the court dismissed Hart's request to reconsider his appeal; ordered that its earlier April 2012 decision rejecting the appeal be complied with “forthwith;” and ordered Hart to pay the state's attorney fees and costs. That order was issued “subject to the automatic stay in Appellant's bankruptcy proceeding.” Hart had filed for bankruptcy, but has since voluntarily withdrawn that petition; his bankruptcy filing had prompted an automatic stay on other court cases involving his finances, including a federal foreclosure lawsuit seeking to foreclose on his Athol home for more than $500,000 in back federal income taxes, penalties and interest. That stay has now been lifted.

Hart repeatedly appealed an order to pay more than $53,000 in back state income taxes, penalties and interest; he has maintained that both state and federal income taxes are unconstitutional. In his appeal to the Idaho Supreme Court, he argued that his status as a state lawmaker should have entitled him through legislative privilege to more time to file his appeal after a 91-day appeal period had expired, because a legislative session followed the appeal period. The court disagreed, writing, “In this instance, Hart is just a taxpayer, with no greater privilege than his constituents.”

Hart lost his re-election bid in the May GOP primary, so he leaves office at the end of his current House term, his fourth. Bill von Tagen, deputy attorney general for the state Tax Commission, said Hart owes the state both for the attorney fees and the underlying tax liability, and the state will be “seeking to collect it if we can.” He added, “There's a lot of people in line ahead of us, unfortunately.”

Feds gear back up foreclosure case against tax-protesting Idaho lawmaker

Federal authorities are gearing back up their foreclosure lawsuit against tax-protesting Idaho Rep. Phil Hart, now that Hart's voluntarily dismissed his bankruptcy filing - which had placed an automatic stay on the foreclosure case. U.S. District Judge Edward Lodge has lifted the stay in the case that goes after Hart's log home in Athol, but at Hart's request, agreed to a delay until mid-November for the first discovery deadlines in the case, due to the unexpected illness of Hart's Kentucky attorney. U.S. Justice Department lawyers had asked for a deadline a month earlier.

In legal documents filed in federal court in Boise, Hart's lawyers wrote, “Hart has no objection to the lifting of the stay,” as long as the deadlines are pushed back. The lawyer's malady is described variously in the filing as “a sever staph infection” and as a “staff infection.” Hart filed his bankruptcy case in May, just 48 hours before he was scheduled to be deposed in the home-foreclosure case, which seeks to take his house to settle more than $500,000 in back federal income taxes, penalties and interest. You can read my full story here at spokesman.com.

Feds: Rep. Hart’s bankruptcy plan ‘not feasible’

Federal prosecutors are calling for Idaho Rep. Phil Hart's proposed bankruptcy plan to be dismissed, saying it's improper, it wouldn't appropriately satisfy his half-million-dollar federal income tax debt, and it relies on an income source that will disappear at the end of this year: His legislative salary. Hart, a tax protester and fourth-term state lawmaker, was defeated in the May GOP primary, so his legislative salary will end in December.

“Hart's plan is not feasible,” wrote U.S. Department of Justice attorney Adam Strait in legal arguments filed in federal Bankruptcy Court. Hart had proposed paying $200 a month for five years - a total of $12,000 - to get his entire debt of more than $600,000 discharged. Most of that debt is to the IRS; it also includes more than $50,000 in back state income taxes, penalties and interest, and $22,000 in credit card debt. The plan, Strait wrote, “fails to make adequate provision for paying the United States' priority income tax debts.”

Prosecutors also noted Hart's refusal to answer numerous questions about his assets during a bankruptcy proceeding last month, from the home where he lives to the car he drives - neither of which he acknowledges owning. You can read my full story here at spokesman.com.

Hart stonewalls creditors at bankruptcy hearing, move could imperil his case

State Rep. Phil Hart, R-Athol, refused to answer numerous questions about his finances in a meeting Friday with creditors in his bankruptcy case, a move attorneys called unprecedented and likely to imperil his case in court. An attorney with the U.S. Department of Justice and another representing the Idaho State Tax Commission grilled Hart about his business interests, income, assets and debts during a meeting conducted by the trustee in Hart’s Chapter 13 bankruptcy filing; Hart was questioned under oath in the session at the Coeur d'Alene federal courthouse.

Hart, a longtime tax protester who owes the IRS more than $550,000 and the state more than $50,000, said he thought many of the questions – including ones about corporations he helped set up and about the Athol house he lives in – were inappropriate or irrelevant to his bankruptcy filing. He repeatedly responded, “I decline to answer.”

Refusing to answer such questions is highly unusual in such a meeting, said Ford Elsaesser, a Sandpoint lawyer representing the trustee in the case. Elsaesser said he has conducted around 30,000 debtor-creditor meetings. “I’ve never had a debtor decline to answer the routine questions that were asked,” he said. “Refusals to answer are not likely to be looked upon favorably by the bankruptcy court.” You can read our full story here from S-R reporter Scott Maben at spokesman.com.
  

Rep. Hart tells court he’d pay $200 a month for 5 years to settle $600,000-plus debt

Outgoing Idaho state Rep. Phil Hart has filed a Chapter 13 bankruptcy plan in federal court that proposes that he pay $200 a month for five years - a total of $12,000 - to get his entire debt of more than $600,000 discharged. The vast majority of that debt is back federal income taxes, penalties and interest owed to the Internal Revenue Service; it also includes more than $50,000 in back state income taxes, penalties and interest owed to the Idaho State Tax Commission, along with $22,000 in credit card debt.

“Debtor will pay to the trustee for a term, not exceeding 60 months, the sum of $200 monthly,” the plan says. No other payments are proposed, though Hart does report that he anticipates income tax refunds over the next five years, and agrees to turn those over as well.

A Spokane bankruptcy attorney with expertise in Chapter 13 cases said it's “unlikely” that such a plan would be approved. “Generally, you don't get to discharge your tax debts,” said David Gardner, an attorney with Winston and Cashatt. Gardner said the plan likely will draw objections from both the bankruptcy trustee and the creditors - including the IRS - when it comes up for a hearing in August. “For that amount of cash, I would expect the IRS to be very involved,” he said. You can read my full story here at spokesman.com.

Hart bankruptcy filing shows IRS has been garnishing entire legislative salary

When the state of Idaho made out its paychecks for tax-protesting state Rep. Phil Hart twice a month for the past seven years, the money didn't go to Hart - it went straight to the IRS. That's what Hart reported in documents filed this week in his bankruptcy case, in which he lists more than $600,000 in debt, most of it to the IRS and the Idaho State Tax Commission. In his supporting documents seeking a Chapter 13 bankruptcy reorganization, Hart reported, “100 percent of Legislative pay garnished since 2005, $16,000 annually.”

Bruce Newcomb, who was Idaho's longest-serving House speaker, said he was troubled by the revelation. “Let's put it this way: I find it very odd,” he said. “A person has a right to protest their taxes. But this has been one of the more extreme endeavors I've ever seen in my life's experience.” Newcomb said he worries about the impact of the case on the institution of the House. “The general public is suspicious of politicians in general, and when something like this comes along, it only serves to confirm what some people think,” he said. You can read my full story here at spokesman.com.
  

Idaho Supreme Court stands by ruling, won’t reconsider Rep. Hart’s tax appeal

The Idaho Supreme Court, without comment, has dismissed tax-protesting Idaho state Rep. Phil Hart's request to reconsider his state income tax appeal, in which he argued the court should have given more consideration to his legislative privilege argument. In a one-page ruling, the Supreme Court declared, “After due consideration, it is hereby ordered that Appellant's petition for rehearing be, and hereby is, denied.”

Hart appealed an order to pay more than $53,000 in back state income taxes, penalties and interest, but filed his appeal months after the 91-day appeal period had expired. He argued that because an Idaho legislative session fell just after the appeal period, his status as a lawmaker should entitle him to more time to file. The Idaho Supreme Court strongly disagreed, writing in its unanimous decision in April, “In this instance, Hart is just a taxpayer, with no greater privilege than his constituents.” You can read my full story here at spokesman.com.

Hart wants Idaho Supreme Court to reconsider his legislative immunity claim

Tax-protesting Idaho state Rep. Phil Hart is asking the Idaho Supreme Court to reconsider its dismissal of his state income tax appeal, saying the court should have given more consideration to his legislative privilege argument. Hart appealed an order to pay more than $53,000 in back state income taxes, penalties and interest, but filed his appeal months after the 91-day appeal period had expired. He argued that because an Idaho legislative session fell just after the appeal period, his status as a lawmaker should entitle him to more time to file.

The Idaho Supreme Court strongly disagreed, writing in its unanimous decision in April, “In this instance, Hart is just a taxpayer, with no greater privilege than his constituents.” Hart's bid for reconsideration argues that the framers of Idaho's Constitution “were intimately aware that their full attention, without any distraction of any nature, was required in order for them, and future legislators, to accomplish their work on behalf of the people.” You can read my full story here at spokesman.com.
  

Tax-protesting Rep. Hart files for bankruptcy

Tax-protesting Idaho state Rep. Phil Hart, who lost his bid for a fifth term in the GOP primary two weeks ago, has filed for bankruptcy. In Hart's petition for Chapter 13 bankruptcy, he lists just three creditors: The IRS, the Idaho State Tax Commission, and Anderson & Krieger, a construction defect law firm in Sacramento, Calif.

Hart also is facing a foreclosure lawsuit from the U.S. Justice Department seeking to foreclose on his Athol home for more than $500,000 in back federal income taxes, penalties and interest, and a state order to pay more than $53,000 in back state income taxes, penalties and interest. Michael McFarland, Hart's Coeur d'Alene attorney in the bankruptcy proceeding, said, “I'm really not in a position to discuss details.”

Hart's filing doesn't list any debt amount, but that must be detailed in subsequent filings that the court has ordered him to make within 14 days; you can read our full story here at spokesman.com.
  

Hart: Pledges to continue to fight, says he doesn’t owe the state any tax

Idaho Rep. Phil Hart tonight issued a defiant press release after the Idaho Supreme Court unanimously rejected his state income tax appeal, saying he plans to continue to fight. “It is but another phase of my quest for justice,” Hart wrote in the release he posted on Facebook; you can click below to read it in full. He maintained, “I do not owe the State of Idaho any tax.”

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Betsy Z. Russell covers Idaho news from The Spokesman-Review's bureau in Boise.

Named best state-based political blog in Idaho for 2013 by The Fix

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