TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, May 24, 2012

Columbia Journal of Tax Law Publishes New Issue

Columbia The Columbia Journal of Tax Law has published its sixth issue (Vol. 3, No. 2):

  • Sachin S. Pandya (University of Connecticut, School of Law), Tax Liability for Wage Theft, 3 Colum. J. Tax. L. 115 (2012):  "This paper shows how, under existing tax law, illegal wage underpayment by an employer (sometimes called “wage theft”) may generate employer tax liability for unreported income or disallowed business expense deductions. Given that the tax authority needs information from the underpaid worker to prove such liability, the paper identifies two ways that a worker can transmit that information to a tax authority: becoming a tax informant, or bringing a qui tam action under a state false claims act. Finally, the paper discusses possible influences on the decision of the unpaid worker to inform on the employer to the tax authority, and considers the conditions under which a tax authority is likely to audit an employer based on such information. In so doing, the paper identifies a new approach to combating wage theft and an undiscovered implication of basic income tax law."
  • Ryan A. Compton (University of Manitoba, Department of Economics), Christopher C. Nicholls (Western University, Faculty of Law), Daniel Sandler (Western University, Faculty of Law) Lindsay M. Tedds (University of Victoria, School of Public Administration), Quantifying the Personal Income Tax Benefits of Backdating: A Canada – US Comparison, 3 Colum. J. Tax Law 144 (2012):  "This paper contrasts the post-tax returns of backdated at-the-money options to currently-dated in-the-money options (with the same strike price as the backdated options) and demonstrates that a Canadian executive can earn a significantly larger after-tax return from backdated options compared to a US executive. We tie this to the favorable Canadian tax treatment of executive options relative to their treatment in the United States. The comparison suggests that the personal tax regime may have been one of the factors which impacted the desire to receive backdated options in lieu of other forms of compensation in Canada but not so in the United States."
  • Jonathan P. Schneller (Law Clerk, Justice Elena Kagan, U.S. Supreme Court), Adam S. Chilton (Ph.D. candidate, Harvard University, Department of Government) & Joshua L. Boehm (J.D. 2012, Harvard Law School), The Earned Income Tax Credit, Low-Income Workers, and the Legal Aid Community, 3 Colum. J. Tax. L. 177 (2012):  "The Earned Income Tax Credit (“EITC”) is the largest U.S. welfare program, with twenty-four million low-income Americans receiving $60 billion of disbursals in 2009. Through the EITC, working Americans with little or no tax liability can receive up to nearly $6,000 in refundable tax credits each year. Over the past two decades, policymakers have increasingly favored the EITC over direct-transfer welfare programs, citing its lower administrative expense (as recipients “self-certify” by filing taxes) and incentives for recipients to work. Despite its political appeal, the EITC suffers deep structural flaws. Largely because EITC claimants have little guidance in navigating the difficult filing process, they are subject to high rates of IRS audits and rescission of benefits with penalties and interest. This proliferation of EITC-related controversies has created an immense need for legal assistance, yet low-income tax law largely remains a peripheral concern within the legal aid community."
"In this article, we suggest a comprehensive and achievable set of reforms that the IRS and legal services organizations can enact to improve the EITC’s efficacy and fairness. We first describe how the complexity of EITC eligibility criteria creates a tremendous burden for low-income Americans, as they frequently lack advice in tax filing and cannot afford legal representation in the event of a controversy with the IRS. We then outline measures that the IRS should implement to make the EITC more accessible and understandable to those qualifying for the credit, reducing the chance of an audit and loss of benefits. In particular, we focus on improving the tax filing process, making EITC audits more manageable for recipients, instituting less adversarial procedures for EITC-related Tax Court proceedings, and changing certain organizational structures within the IRS. Finally, we propose several practical ways that the legal aid community can enhance its support of EITC recipients confronting an IRS audit or Tax Court action. Most importantly, we argue that EITC assistance warrants greater Congressional funding and higher strategic and budgetary priority within legal aid organizations, given that the EITC is now far larger than the direct-transfer welfare programs on which legal aid lawyers have traditionally focused."

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