Home > General, Markets > Let’s play “stump the tax man”

Let’s play “stump the tax man”

January 14, 2010

IRS Commissioner Douglas Shulman doesn’t file his own taxes because he believes the tax code is too complex. (See: http://thehill.com/blogs/blog-briefing-room/news/75119-irs-commissioner-doesnt-file-his-own-taxes )

However the complexity has now reached the point where even accountants and the tax authorities don’t understand the rules.

From New York’s new Form IT-204-LL-I:

“A partnership, LLC, or LLP with no income, gain, loss, or deduction from New York sources who is filing a partnership return solely because it has a New York resident partner, is formed under the laws of New York State, or is dormant, is not subject to the filing fee.”

That seems pretty straightforward. Except the next paragraph reads:

“The amount of the filing fee will be based on the New York source gross income for the tax year immediately preceding the tax year for which the fee is due.  If the LLC or LLP did not have any New York source gross income for the preceding tax year, the filing fee is $25.”

These two paragraphs are 100% contradictory.  The first paragraph says if you have no NY-sourced income, you don’t pay any fee. The second paragraph says if you have no NY-sourced income, you pay a $25 fee.

Rocky’s corporate accountant called the New York State Tax Department professional assistance desk for an official interpretation of these paragraphs. After thoroughly researching the issue, The Tax Man’s answer: “We don’t know.”

The  Tax Man’s honesty is refreshing. This lastest example of  tax code lunacy is not.

  1. January 14, 2010 at 3:17 pm

    I am reminded of the story of Godel’s application to become a US citizen (http://morgenstern.jeffreykegler.com/) But doesn’t the first paragraph say no NY-sourced income AND you are filing “because it has a New York resident partner, is formed under the laws of New York State, or is dormant”? So I could have no NY-sourced income but not be filing for one of those reasons and I’d have to pay, right (unless those three exhaust the reasons that one would have pay in the first place…but it seems I could have no NY resident partner, not have the partnership formed under NY laws, and not be dormant.)

    I think I’m the only guy around who actually enjoys filing is taxes. Of course, we got married on tax day (our wedding announcements were 1040s showing the modification of our “status”) and where we go out to dinner is decided by the size (or lack there-of) of our tax return.

    But seriously if they are going to make complicated they should at least have to express the code in some kind of language with structure like a programming language.

  2. January 14, 2010 at 3:44 pm

    Despite any allegations by The Tax Man to the contrary, there’s no question that Trophy Wife would consider Rocky to be “dormant.”

    But if every man, woman, and child in the USA files an IT-204-LL and send a check for $25 to the New York State Tax Department, it will raise approximately $7 Billion — which just happens to be the 2010-2011 budget deficit. Now that’s a coincidence….


  3. masteroftheuniverse
    January 15, 2010 at 5:05 pm

    Last year, when I gave my info to my tax guy, he threw his hands up in disgust. His bill reflected that disgust.

  4. January 17, 2010 at 12:55 pm

    Sadly, the Tax Man may not need to know that answer, but you KNOW you’ll be penalized for your failure to get it right…

    Good luck with the filing!

  5. January 17, 2010 at 1:17 pm

    Anne: Exactly right! And one would expect that the penalty will be much greater than $25 …

  6. masteroftheuniverse
    January 21, 2010 at 12:22 am

    I know that you’ve been busy at DS,but please keep this site viable. JEFF

    your DS material is first rate,


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