Paying Taxes is Not Patriotic... But Apparently Evading Them Is

From TaxProf Blog:

Two law professors have independently reviewed the tax issues raised by the release of Gov. Palin's 2006 and 2007 tax returns and financial disclosure form, as well as the opinion letter issued from Washington D.C. tax lawyer Roger M. Olsen. Jack Bogdanski (Lewis & Clark) and Bryan Camp (Texas Tech) conclude that there are serious errors in Gov. Palin's returns as filed and that she and her husband owe tens of thousands of dollars in additional taxes.

From Jack Bogdanski, There's No Debate: Palins Owe Thousands in Back Taxes:

There is no serious debate (at least, none that has been brought to our attention) about the fact that at least the amounts paid for the children's travel -- $24,728.83 in 2007, according to the Washington Post -- are taxable. The campaign's tax lawyer has got at least that much of the law, and perhaps more, wrong. ... The Palins, who had their tax returns done by HR Block, simply got it wrong. And the fact that the state payroll office got it wrong, too, doesn't erase the Palins' unpaid tax liability.

And Bryan Camp, A Brief Analysis of Governor Palin's Tax Returns for 2006 and 2007:

The release of an opinion letter by attorney Roger M. Olsen dated September 30, 2008, has stirred up the pot once again about the accuracy of Sarah and Todd Palin’s 2006 and 2007 tax returns. Not only that, but Mr. Olsen’s letter raises a couple of new issues[, including the following five]:

1. The Palins did not report as income some $17,000 that Governor Palin’s employer (the State of Alaska) paid her as an “allowance” for her travel. Can they do that? Yes, most likely.
2. The Palins did not report as income some $43,000 [for two years] that the State of Alaska paid the Governor as an “allowance” for her husband and children’s travel. Can they do that? No, most likely not.
3. The Palins deducted $9,000 on their 2007 return, claiming it was a loss from Mr. Palin’s snow machine racing activity. Can they do that? Most likely not, but more information could make the deduction OK. If any of the above issues goes against the Palins they then risk getting hit with the section 6662 penalty for “negligence or disregard of rules or regulations.”
4. Can the Palins avoid the section 6662 negligence penalty by claiming that they reasonably relied either (a) on the W-2’s sent to them by their employer, which did not reflect either the $17,000 or the $43,000, or (b) on their tax return preparer H&R Block, or (c) on Mr. Olsen’s opinion letter dated September 30, 2008? The three reliance defenses are unlikely to succeed, but more info may make the (b) defense a good one.
5. Does Mr. Olsen have any exposure to sanctions by the IRS because of his letter? I believe Mr. Olsen’s letter probably violates 31 C.F.R. section 10.35. If so, he would be exposed to possible sanctions from the IRS Office of Professional Responsibility.

From my understanding of the above, there are only two explanations for the above: either Governor Palin was fully aware of the nature of the perq compensation she received and misrepresented them to her tax advisors OR she hired extremely "conservative" tax advisors who were ridiculously generous in the way they categorized the perqs of her employment.  Coming from someone who only took baby tax in law school, I can say pretty definitively that no tax advisors should have, under any circumstance, claimed travel paid for spouse and children as reimbursable business expenses.

This is not a situation of an "overly-complex tax code" since there really is little dispute over this area and any tax lawyer should have flagged this violation.

Kady blogs at Wonkess

Comments

[cynematic]

Ha! I think, by Palin logic, I'll start deducting food and kitty litter costs for my two cats from my taxes since they often accompany me as I write. /eyeroll

[Lawyer Mama]

Geesh. So this is what happens when you don't properly vett a candidate. Any law student who'd taken one semester of tax law could have looked at those returns and raised a red flag.

[John J.]

Using HR Block as your tax preparer isn't an excuse for not properly doing your taxes either. My tax preparer works for Block (full discloser, he is my father) and when Jaelithe, our son, and I went to the DNC he repeated multiple times, "Keep your receipts separate, only Jaelithe's expenses are deductible." They even have forms to keep track of it that he was about to give me.

If the Palins' preparer actually told them they could claim the children's and Todd's travel expenses as deductible, it was willful tax fraud on his part or they train them very differently up there.