Monday, October 6, 2008
Jack Bogdanski (Lewis & Clark) & Bryan Camp (Texas Tech) 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 remarkable opinion letter issued from Washington D.C. tax lawyer Roger M. Olsen. Jack and Bryan 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.
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.
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.
This paper focuses on five problems: three raised in the tax returns and two new ones raised by Mr. Olsen’s letter. Here’s a summary of the five problems and my conclusions, for those who want to cut to the chase. My analysis will follow.
- 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.
- The Palins did not report as income some $43,000 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.
- 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 info 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.”
- 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.
- 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.